Forward Outlook

Economic and Political Outlook

The opposition Labour Party won the November federal election with leader Kevin Rudd becoming the new Prime Minister. Since taking office, the Economist reports that a number of policy changes have been made that mark a clean break from the previous administration.

The Economist reports that the continued strength of domestic demand, a tight labour market and capacity constraints mean that inflationary pressures are likely to remain strong in 2008-09. The Labour government will cut taxes in 2008-09, but will also trim public spending growth in order to contain inflationary pressures.

The Economist Intelligence Unit expects GDP growth to slow to 2.7 per cent in 2008 from 4.3 per cent in 2007. The fiscal surplus will average a healthy 1.4 per cent of GDP in 2008-09.

However interest rate increases and rising fuel prices are hurting consumer and business confidence, while accelerating inflation is eating into real wage growth. In June 2008, the Westpac/Melbourne Institute Index of Consumer Sentiment reached its lowest level since December 1992.

The Australian dollar was near a 24-year high against the US dollar in late-June 2008, but weaker economic conditions will weaken the currency in the second half of 2008 and in 2009.

Tourism Outlook

Outbound tourism is forecast to continue growing at a far stronger rate than domestic tourism, given the increasing propensity of residents to travel overseas, the expansion of low cost air capacity to outbound markets and the overall expansion in international aviation capacity servicing Australia from late 2009.

Recent interest rate rises are not expected to significantly impact visitor numbers, as over 70 per cent of Australia's private wealth is held by people over 50 who are freehold home owners and still able to afford travel.

Sources: Tourism New Zealand Regional Rap, www.economist.com (Australia Country Briefing), www.tourism.australia.com