Macro-economic Policies Monetary policy has been put on a much sounder footing in the 1990s than in earlier decades. The inflation targeting regime has been a success in Australia, as it has in other countries that have adopted this approach. The Government's recognition of the independence of the Reserve Bank has also been an important factor. Monetary policy has, in effect, become depoliticised, and decisions can now be based more on medium-term considerations than in earlier decades. Low inflation, and the fact that it has been maintained without forgoing economic growth, is the clearest testimony to this improvement.
Fiscal policy is also in much better shape.
The Budget is in surplus and projected to stay there during the period covered by the forward estimates. Instead of showing one year's position, this measure summarises the effect of all previous years' surpluses or deficits. As you can see by the next slide, Australia has the lowest ratio of any OECD country, and it is still declining. One aspect of Australia's recent economic performance that has received favourable comment is the behaviour of the exchange rate. When the Asian crisis erupted, the exchange rate fell so that at its low point in August last year it had fallen by a very significant amount.