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

Deputy Prime Minister and Treasurer

3 December 2007 - 27 June 2013

30 September 2010

NO.065

IMF Article IV Consultation with Australia

In its Article IV concluding statement released today, the International Monetary Fund has strongly endorsed the Government's responsible economic and fiscal management, which will see the budget return to surplus in three years, comfortably ahead of all major advanced economies.

The IMF statement follows the IMF staff mission to Australia for its annual Article IV consultation, which took place from 9 to 20 July.

The IMF has reiterated its praise of the Government's decisive stimulus action which saw Australia emerge from the global recession better placed than almost any other developed economy, and supported hundreds of thousands of jobs from coast to coast.

The statement underscores that the Government's strict spending discipline is contributing to a rapid return to surplus and a fiscal consolidation which is faster than that of most other countries.

The IMF details that "returning quickly to budget surpluses as the authorities intend will put Australia on a firmer footing to deal with future shocks" and that Australia's level of public debt "is projected to remain very low by advanced economy standards."

The leading global economic institution has in this document again strongly endorsed the Government's policy response to the global recession and its timetable for withdrawal of fiscal stimulus, reporting that the "quick implementation of targeted and temporary fiscal stimulus provided important support for domestic demand, cushioning the impact of the global downturn."

The statement makes it clear that the Government's decisive earlier fiscal stimulus is part of the reason Australia is now faring better than most comparable countries. It found that "Australia was one of the few advanced economies to escape recession in 2009" and that "this reflected strong demand for commodities from China, a prompt and significant macro policy response, a healthy banking sector, and a flexible exchange rate."

With the global economy now recovering from the deepest recession in 75 years, the IMF believes that "policy stimulus is appropriately being withdrawn" and that "the exit from stimulus, which began this year, sees the budget back in surplus by 2012/13." The IMF confirms that "this is faster than past consolidations in Australia and plans in most other advanced economies."

The IMF has again backed the strength of Australia's financial sector saying that banks have maintained "adequate provisioning and sound asset quality" and any vulnerabilities are mitigated by the Australian Prudential Regulation Authority's "intensive prudential supervision".

The IMF sees "favourable medium-term growth prospects" for the Australian economy, led by private investment in mining, commodity exports and Australia's growing integration with emerging Asia. It notes that the industrialisation and urbanisation of China and the rest of emerging Asia will have an enduring effect on Australia's terms of trade, which are projected to "recover to historical highs."

The IMF is projecting GDP growth in Australia of 3 to 3 ½ per cent in 2010 and 2011. This profile is broadly consistent with Pre-Election Economic and Fiscal Outlook forecasts.

The IMF's views serve as the foundation for the Government's determination to build on its economic successes, and create a stronger, broader more competitive economy that benefits all Australians.

Release of the concluding statement is consistent with the Government's support for enhanced transparency of the IMF's bilateral surveillance process.

CANBERRA
30 September 2010