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

20 September 2012

2012 IMF article IV consultation with Australia

The IMF has today lauded the strong fundamentals and bright outlook of the Australian economy and delivered a resounding endorsement of the Government's economic and fiscal management in the face of ongoing global challenges, following its detailed consultation on the Australian economy.

The IMF highlights the standout performance of the Australian economy, with impressive economic growth, low unemployment, contained inflation, healthy consumption and strong growth in business investment.

While the Australian economy is not immune from global turbulence, the IMF confirms that the strength and resilience of the Australian economy stands in stark contrast to most developed economies, with many grappling with anaemic or negative growth and unacceptably high levels of unemployment.

The IMF re-affirms Australia's bright economic outlook, and expects GDP growth of 3¼ per cent this year, faster than every single major advanced economy.

Once again the IMF strongly endorses the Government's fiscal strategy and commitment to return the Budget to surplus in 2012-13, noting in the concluding statement to its Article IV consultation that:

"The authorities' fiscal consolidation path strikes a balance between the need to limit both public and external debt increases while containing any adverse impact on economic growth."

The IMF also underscores that Australia is only part way through the resources boom, highlighting the strong outlook for mining investment and the enduring benefits that this will bring in the form of greater export capacity.

While commodity prices have declined from their recent peaks, the IMF expects them to remain at high levels, reflecting robust conditions in our region.

It says that "private resources sector investment is projected to reach historic highs as a percent of GDP over the next two years, driven by construction of several large iron ore and liquefied natural gas projects. This investment will boost Australia's resources export capacity as projects come online."

The IMF also found that Australia's economic fundamentals have improved since the global financial crisis, pointing to stronger household and business balance sheets and a more resilient financial system. Australian banks have moved towards more stable funding sources in response to the global financial crisis. The IMF notes that reliance on wholesale funding has decreased, capital ratios are increasing and banks are well-placed to meet Basel III capital requirements.

The IMF also supports the continued move towards a policy-mix that combines a tighter fiscal policy with an accommodative monetary policy stance, which is consistent with a policy setting where monetary policy plays the primary role in managing demand.

It also notes that the Government's fiscal consolidation "should also ease pressure on the exchange rate by boosting national saving" and welcomes additional steps that will support private savings, such as the legislated increase in the superannuation guarantee.

The IMF applauds the Government's efforts to formulate a forward-looking strategy to deal with the longer term structural transitions in the Australian economy, including efforts to make the most of the opportunities in our region, the fastest growing and most dynamic part of the global economy.

It highlights that governments and business both have a role in making the most of opportunities in the Asian Century as it unfolds - a key theme of the upcoming White Paper on Australia in the Asian Century.

Release of the IMF's concluding statement reflects the Government's support for enhanced transparency of the Fund's bilateral surveillance process.