The performance of the Australian economy has remained solid. It weathered the world financial and economic crisis better than most of the OECD and, indeed, avoided a recession. Unemployment has already fallen back to near its structural level, and the government balance sheet is healthy. Although these remarkable results were in part due to the dynamism of the Asian markets, they illustrate both the structural resilience of the economy, well-functioning financial and labour markets and the timely and strong policy response to the crisis. Managing the exit strategy is less problematic in Australia than in most OECD countries thanks to the sound fiscal position and favourable outlook, although policy vigilance is required as the new cycle starts with inflation around the middle of the medium-term target and little spare capacity.