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2005 OECD Economic Outlook, Volume 2005 Issue 1

image of OECD Economic Outlook, Volume 2005 Issue 1

Presents OECD's assessment of the economic outlook to the end of 2006 for the OECD area and China, Brazil, and the Russian Federation.  It finds that Japan and the US have rebounded but that Europe is lacking in sustained momentum, and it carefully examines why. This issue of the OECD Economic Outlook also includes several medium-term scenarios projecting to 2010. The special chapter covers measuring and assessing underlying inflation.

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Australia

Economic growth slowed in the second half of 2004, reflecting the ongoing drag from net exports, and a rundown in inventories. With domestic demand weakening as households restructure their finances towards lower dissavings, GDP growth should remain subdued this year but pick up thereafter, helped by an acceleration in exports. The slowing economy, combined with firmer monetary conditions, is expected to keep inflation within the Reserve Bank’s 2 to 3% target band.

To create room for continued strong growth, the government should accelerate structural reforms to reduce the risks of capacity constraints proliferating. Reforms should focus on making wage bargaining more flexible, creating stronger incentives to labour market participation, removing disincentives to hiring, improving training and education, and promoting productivity growth by further strengthening competitive pressures in the economy.

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