2018 OECD Economic Surveys: Australia 2018

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Australia's long span of positive output growth continues, demonstrating the economy's resilience. In the absence of negative shocks, policy rates should start to rise soon, as wage growth and price-inflation pick up. Fiscal discipline will nevertheless still be required to bring balances to surplus. Despite countervailing measures, the housing market and related debt pose macroeconomic risks. Furthermore, as flagged in previous Surveys, there is room to improve the tax system, notably through greater use of value-added tax and less use of inefficient and distorting taxes, such as real-estate transactions tax.  


Levels of well-being are generally high but climate-change policy still lacks clarity and stability and there are socio-economic challenges. Some groups are at high risk of being disrupted by globalisation and technological change and this is the theme of this Survey’s in-depth chapter. Further reforms to education, including efforts to improve PISA scores and vocational education, and better target disadvantaged students, are important. So too is activation policy where there is scope to improve employment services, support for displaced workers and measures helping parents combine work and family life. Australia’s highly urbanised population means that good metropolitan transport, planning and housing policy can importantly boost labour-market flexibility, as well as living standards.




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Key Policy Insights

With 27 years of positive economic growth, Australia has demonstrated a remarkable capacity to sustain steady increases in material living standards and absorb economic shocks. During the global financial crisis, comparatively limited exposure, but also good economic management, saw output growth hold up well (Figure 1). Also, the economy's adjustment in the wake of the commodity super-cycle has been reasonably smooth. This good macroeconomic performance has strengthened the country's standing in terms of GDP per capita (Figure 1). Furthermore, scores are favourable on many other indicators of well-being. Australia performs particularly well in health status, ranking first among OECD countries with life expectancy of 82.5 years compared with an OECD average of 80.1 years and a high score in self-reported health (Figure 2). It also scores well in terms of air pollution, ranking 5th in the OECD, subjective well-being and social connections (both 7th place in the rankings). Immigration has played a fundamental role in the demographic, economic and cultural development of Australia, and continues to do so with broadly successful integration of new migrants.



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