In the first few months of this year, with which this commentary is mainly concerned, economic activity expanded quite strongly. The main impetus came from a further pronounced shift of resources into the trade balance; and there are good reasons to expect the recent growth in exports to be sustained. Consumer spending also rose fairly rapidly in the first quarter, but given the impact of the counter-inflation policy on real incomes, any further growth is likely to depend on whether there is a decline in the saving ratio. Last year's heavy run-down of stocks appears to have come to an end in the March quarter, and restocking is likely to be resumed and to provide a stimulus to growth during the rest of this year. Good progress has been made towards reducing inflation, but this remains the country's most critical problem, with domestic inflation still well above that of our main competitors (see the concluding assessment).