Get set for another year of growth and prosperity

The past year was another great one for business and the Victorian economy and the outlook is for a repeat performance in 2006.

The international outlook is just about as good as it gets.

China continues to suck-up our resources like the long starved, giant it is.

The Japanese economy, after fifteen years of rolling recessions, is back on track with the Nikkei growing by 40 per cent during the 2005.

The United States economy continues to purr along driving the world economy with it.  Our neighbours in Asia while no longer tigerish, are still growing vigorously.

Of course there are weak spots, like most of old, continental Europe, but the final tally they matter little.

The local outlook is, if anything, even better than the world outlook.

The housing market is dong fine, achieving slower but still respectable and more sustainable rates of growth.

The doomsayers are still preaching collapse, but wisely few people are listening.  Household consumption is still growing albeit at a slower rate.

Importantly exports and business investment are picking-up and nicely filling the gap created by slowing household and housing sectors.

Export growth while respectable, has in recent years been dwarfed by the flood of imports sucked in to feed the consumption boom.

The consumption boom is over and the commodity boom is on.  Prices of most commodities are at near record levels as are export volumes.

Accordingly the current account deficit which did reach disconcerting heights in 2005 is starting to decline.

High demand and profits are driving near record levels of investment in mineral and energy capacity and associated infrastructure.

And much more is on the drawing boards not the least being the $28 billion Gorgon LNG project located in WA's northwest.

There is also an investment boom under way in general business and social infrastructure.

State governments, notably Queensland, Western Australia and Victoria, are spending at near record levels on infrastructure in the budget sector, in public-private partnerships and via government business enterprises.

Even the utilities industry, which for the past decade has focused on getting the most out of existing assets, is investing in new capacity.

The private sector is also investing heavily.

Indeed business investment measured as a share of the GDP in 2006 is expected to reach levels not experienced since 1950s.

Of course, there are more than a few challenges in the New Year.  2006 could well prove to be an annus horribilis for some sections of the State's manufacturing sector.

The potential bankruptcy of General Motors and perhaps Ford Motor Company, as well as the growing competition from China, augers poorly for local auto industry.

The food manufacturing sector, which has long failed to live up to its potential, is also facing a do or die year.

The good news is that the Howard Government's new IR reforms at long last provide the necessary legislative environment for the food and auto industry to restructure, survive and perhaps grow.

The question is:  is the management and work force in these industries up to the task?

For most of us, though 2006 looks to be another year of growth and prosperity.

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