The Crest of the Commonwealth of Australia Treasury Portfolio Ministers
Picture of Wayne Swan

Wayne Swan

Deputy Prime Minister and Treasurer

3 December 2007 - 27 June 2013

9 April 2008

NO.021

IMF World Economic Outlook

The IMF's latest World Economic Outlook highlights the difficult international environment Australia confronts as the Rudd Government continues framing the 2008-09 Budget.

The IMF has lowered its forecasts for global growth to 3.7 per cent in 2008 and 3.8 per cent in 2009, with the impacts of financial volatility and tight credit markets set to continue in the short term. The possibility of further financial shocks remains the major risk to the global outlook.

I depart today [Thursday] for this weekend's IMF and World Bank Spring Meetings in Washington D.C., and for associated meetings with key global economic policy makers, to discuss these significant developments.

It is important that we recognise the severity, duration and possible consequences of the global financial turbulence, but we should also recognise that Australia's circumstances are more favourable than those elsewhere.

The IMF expects the Australian economy to grow by 3.2 per cent in 2008 and 3.1 per cent in 2009. This is well above the IMF's growth outlook for advanced economies. Australia is well-placed but we are certainly not complacent.

While slower growth in the US and elsewhere is expected to have some impact on key emerging market economies, the IMF expects that any easing will be moderate, with robust growth forecast to continue in China and India in 2008 and 2009.

Developments in the global economy underscore the importance of careful economic management as well as the Government's efforts to fight inflation and modernise the economy.

The WEO highlights the challenge of elevated inflationary pressures in the Australian economy.

Inflation is forecast to remain above 3 per cent over 2008 and 2009, with the IMF noting that, 'the main short-term policy challenge is to keep inflation pressures in check in the face of strong domestic demand, high capacity utilisation, and tight labour market conditions'.

The WEO also highlights the need for responsible fiscal management in the current international environment, stating that 'prudent fiscal policies and flexible exchange rates continue to provide... important buffers against any substantial weakening in the external environment.'

The Government is committed to responsible fiscal management and to modernising our economy to ease inflationary pressures and help us withstand the global pressures we face.

SYDNEY
9 April 2008