SunshineCoastRegionalReport2ndQtr2004

                                                                                                        The Reserve Bank of Australia has held
PRICES, INFLATION &                                                                                     interest rates steady so far in 2004, but it is
                                                                                                        likely another interest rate rise will occur
FINANCIAL MARKETS                                                                                       later in the year.
MONETARY POLICY

Since the last economic update, the US Federal Reserve has increased interest rates to 1.50% in response to an improved economic
outlook, with more rate hikes projected in the period ahead. In Australia, rates have been on hold for eight months at a much higher
5.25%.

The most recent information on the Australian economy shows that household consumption continues to be the primary driver of
growth, although business investment is also showing signs of strength. The housing sector remains buoyant despite a drop-off in
activity in approvals, with home improvements taking up any slack in that sector On the export front, international economic
conditions are brighter than they have been for quite some time (particularly in the US and Asia) and a continued recovery is forecast
despite some potential softening in commodity prices.

Overall, there is likely to be a more sustainable mix of growth across the different sectors of the economy and employment growth
should remain strong, with the unemployment rate holding near 20-year lows. The main risks to the economy are terrorist activity,
higher fuel prices and a steeper than anticipated drop-off in new housing activity.

Given these projections, we may see interest rates rise by up to 0.50% through 2004/05 as the Reserve Bank moves to prevent the
economy from overheating.


                               %
                              7.5
                                                                        Official Cash Rates
                              7.0                                              Australia       US
                              6.5
                              6.0
                              5.5
                              5.0
                              4.5
                              4.0
                              3.5
                              3.0
                              2.5
                              2.0
                              1.5
                              1.0
                              0.5
                              0.0
                                    Jun-99




                                                      Jun-00




                                                                           Jun-01




                                                                                               Jun-02




                                                                                                                    Jun-03




                                                                                                                                      Jun-04
                                             Dec-99




                                                               Dec-00




                                                                                      Dec-01




                                                                                                           Dec-02




                                                                                                                             Dec-03




               Source: RBA, US Federal Reserve




©0, Sunshine Coast Regional Economy, Second Quarter 2004                                                                                            - 48 -