Macroeconomics
Intro:
GDP Growth:
Real GDP is forecast to grow by 3¼ per cent in 2006-07, up from 2½ per cent in 2005-06. Gross national expenditure is forecast to grow by 3½ per cent in 2006-07. Household consumption growth is expected to remain moderate, as households continue to experience a period of weaker growth in dwelling wealth.
The expectations of the economy strengthening from its bad position in the 2nd half of last year, as the drivers of economic growth became broader based; strong employment growth kept consumer spending high and investment levels for businesses remained high.
The risks to the forecast of economic growth had negative outcomes, and growth would be more likely to be weak as opposed to strong, as forecasted.
Inflation
At the end of 2005 the consumer price index (CPI) rose by 2.8%. The most recent big item change is the inclusion of the category for ‘financial and insurance services’ with a weight of 4.5% of CPI and ‘other financial services’; 3.3% and ‘insurance services’ with a weight of 1.5%.
The biggest category is housing (20%), then food (15%), transport (13%), recreation (11%) household contents and services (10%), financial and insurance services (9%), alcohol and tobacco (7%)
This shows that households on average are dedicated more to luxuries and are a bigger part of their budgets. And the share of budgets going to particular categories change over the years as people get richer and luxuries become necessities and as new goods and services is introduced to the markets.
Inflation is expected to remain moderate at 2¾ per cent in 2006-07. In the near term, the direct effect of higher oil prices is expected to continue to contribute to inflation.
However, the cyclical upswing in productivity and slow growth in import prices should have a moderating influence on inflation.
It is currently 3.0%
Other than an interest rate rise, the employment market...
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