The Macroeconomic Outlook

This quarterly two‐year forecast from the Access Economics Murphy (AEM) model updates that presented in the corresponding article in the 4th quarter 1991 issue of the Australian Economic Review. As predicted in the previous forecast, the economy entered a slow recovery in the December quarter of 1991. Steady growth averaging close to 1 per cent per quarter is likely during 1992–93 and 1993–94. Unemployment may peak at around 10 3/4 per cent in mid‐1992, before slowly falling to a year‐average level of around 9 per cent in 1993–94. Under the influence of the recent recession, CPI inflation is likely to be around 2 per cent per annum on a year‐on‐year basis for both 1991–92 and 1992–93. With economic recovery, it is forecast to rise to 4.5 per cent per annum in 1993–94. While the recession has helped bring the current account deficit down from near 6 per cent of GDP in 1989–90 to around 3 per cent for 1991–92, it will rise with economic recovery, and is forecast to exceed 5 per cent of GDP by 1993–94, compared with a sustainable level of 3 to 3 1/2 per cent. The economic recovery is not proving to be as strong as forecast in One Nation. However, there is a recovery clearly underway, and any further easing of monetary and fiscal policy risks prejudicing a substantial part of the recent impressive gains on inflation and creates a major medium‐term problem for public finances.