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Wayne Swan

Deputy Prime Minister and Treasurer

3 December 2007 - 27 June 2013

10 July 2008


IMF Article IV Consultation with Australia

I welcome today's release of the International Monetary Fund (IMF) Concluding Statement of the staff mission to Australia for the annual Article IV consultation, which took place from 23 June to 2 July.

The IMF's statement is a strong endorsement of the Rudd Government's first Budget and long term reform agenda to build our economy's productive capacity.

"The reduction in public spending growth in the latest budget illustrates the government's commitment to help reduce inflation." the IMF Statement said.

The IMF Statement also notes that "As inflation accelerated over the past year, the RBA appropriately tightened monetary policy, and fiscal policy in the latest budget is providing needed support."

The IMF supports the strategy in the Rudd Government's first Budget to reduce public spending growth and save the revenue windfall to put downward pressure on inflation. It also notes that investing surpluses in the Building Australia Fund, the Health and Hospitals Fund, and the Education Investment Fund will take pressure off monetary policy in the near term and enable increased infrastructure investment over the medium term.

The IMF highlights the Government's ambitious reform program in areas such as tax reform, competition and regulatory policy, healthcare, education, infrastructure, emissions trading, water management and Commonwealth-State funding arrangements. It notes that successful implementation would enhance the economy's flexibility, lift productivity, and foster labour force participation.

The IMF remarks on the resilience that Australian banks demonstrated during the recent global financial turmoil. It points out that Australian banks remain profitable and well capitalised, and that asset quality is high by international standards, despite a marginal increase in non-performing loans. It describes the supervisory response to the credit turmoil by the Reserve Bank of Australia and the Australian Prudential Regulation Authority, as timely and appropriate. The IMF also welcomes the Governments announcement to introduce a Financial Claims Scheme and to strengthen crisis management arrangements in the financial sector more broadly.

The concluding statement presents the Mission team's preliminary assessment of Australia's economic performance and policies after discussions with various Australian Government and private sector organisations. It will form the basis of the Article IV report to be prepared by the IMF staff. This report will examine the issues in greater depth and provide the basis for a discussion of the Australian economy by the IMF Executive Board later this year.

Under Article IV of the IMF's Articles of Agreement, member countries undertake to collaborate with the Fund, and one another, to assure orderly exchange arrangements and promote a stable system of exchange rates. The IMF's bilateral surveillance of members' economic policies is directed at monitoring compliance with these obligations and providing advice on policy directions.

Release of this statement is consistent with the Australian Government's support for enhanced transparency of the IMF's bilateral surveillance process. This is the first time an Australian Government has authorised the release of an IMF concluding statement.

10 July 2008