than for australia, so australia ’ s relative performance improved towards the end of this 50 - year period. while economic growth in australia was lower than for the oecd on average over the 1950s and 1960s, it was higher in the 1980s and 1990s, with the biggest advantage in australia ’ s favour occurring in the 1990s. alan blinder, “ hard heads, soft hearts : tough - minded economics for a just society ”, addison - wesley, 1987. e a boehm identified two recessions in the 1970s, the first in 1974 and the second from august 1976 to october 1977. see “ the usefulness and applications of economic indicator analysis ”, institute for applied economic and social research working paper no. 9, 1989. table 1 real gdp growth - average annual rate australia oecd 1950s 1960s 1970s 1980s 1990s 4. 2 5. 3 5. 4 5. 2 3. 4 3. 5 3. 3 2. 6 3. 3 2. 1 this is a surprise to some people and one response is to query it on the grounds that our recent relatively buoyant economic growth could have been mainly the result of our faster population growth. table 2 examines this issue by taking out the effect of population growth and looking at real gdp per capita over the same five decades. on this basis, the recent relative improvement is now more pronounced than in the earlier table. the 1990s not only shows a pick - up in australia ’ s growth of real gdp per capita compared with the two previous decades, but it is the only decade in which australian gdp per capita has grown faster than the oecd area, and by an appreciable amount. table 2 real gdp growth per capita - average annual rate australia oecd 1950s 1960s 1970s 1980s 1990s 1. 8 3. 5 3. 3 3. 9 1. 7 2. 4 1. 7 1. 8 2. 1 1. 3 i do not want to suggest that our recent economic performance means that we have returned to a golden age such as we had in the immediate postwar period. nor do i wish to deny that there is still a backlog of remedial work to be done - our unemployment rate being an obvious example. but, on the other hand, we must be doing something right. our expansion so far in the 1990s has outlasted its predecessors in the 1970s and 1980s, and it is still going strong. we have withstood a difficult external shock, and should be able to sustain

to parliamentary committee, 15 december 1998 and 17 june 1999. i will not say very much about fiscal policy, other than to note that medium - term considerations now play a much larger role, something that chris higgins consistently argued for. the improvement has occurred in two stages after the disaster of the 1970s. in the late 1980s, and again in the mid - 1990s, the budget was brought back into surplus where it remains at present. as a result of this fiscal consolidation, the medium - term health of the government ’ s accounts has improved greatly. one important indicator of this is the stock of government debt to gdp, which is now lower for australia than for virtually any other oecd country. on monetary policy, i will say a little more. a similar realignment towards a medium - term approach has certainly occurred in the case of monetary policy. the centrepiece of this has been the inflation target and the government ’ s reaffirmation of the independence of the reserve bank as outlined in our act. a similar realignment has occurred in a number of other countries, and a model of this type, whether explicit or implicit, is now the mainstream international approach to monetary policy. this approach has been a major factor behind the low inflation of the 1990s, both here and in most other oecd countries. a central channel through which this approach operates is through maintaining low inflationary expectations. wage and price setters no longer need to engage in the defensive behaviour they formerly used to protect themselves against future rises in inflation. similarly, opportunistic tactics aimed at profiting from inflation no longer make sense as a business strategy. and finally, the assumption by businesses that there is no need to resist increasing costs because they can simply be passed on to consumers by raising prices has had to be discarded. while the inflation target has played an important part in maintaining low inflation, there is more to monetary policy than just setting the target - there also has to be a willingness to act in a timely way. this is best illustrated by events in the period from 1994 to 1996 ( diagram 1 ). around mid - 1994, the economy was growing strongly and there were signs that inflation and wages would soon pick up ( this expectation was reflected in a number of places including the yield curve ). the first tightening of monetary policy occurred in august 1994 and was followed by two others before the end of the calendar year. it is important to note that at the time the tightening occurred, the current inflation rate was 2