The IMF in its latest World Economic Outlook (WEO) has confirmed that Australia continues to outperform the major advanced economies and is a leader in the global economic recovery.
The IMF notes that in the context of an uneven global recovery, "Australia and the newly industrialized Asian economies are off to a strong start and will likely stay in the lead".
According to the IMF, Australia will grow by 3.0 per cent in 2010 and 3.5 per cent in 2011. Australia's growth outlook is stronger than that for other advanced economies as a whole, which are forecast to grow collectively by 2.3 per cent in 2010 and 2.4 per cent in 2011, after contracting by a record 3.2 per cent in 2009.
The IMF is forecasting a steady decline in the unemployment rate from current levels, approaching 5 per cent in 2011. This is dramatically lower than the 8 per cent forecast for advanced economies as a whole for the same period.
The IMF's report is another testament to the success of economic stimulus together with the resilience of the Australian people during the toughest economic conditions since the Great Depression.
The IMF notes that the world economy is poised for further recovery, but at varying speeds across and within regions. According to the IMF, the recovery is advancing tepidly in most advanced economies but solidly in emerging and developing economies.
With the global recovery evolving better than expected, the IMF has made modest upward revisions to its global growth forecasts from its estimates published in January. The IMF expects the global economy to grow by 4¼ per cent in both 2010 and 2011.
According to the IMF report, the activity remains dependent on highly accommodative macroeconomic policies and the outlook for activity remains unusually uncertain, with risks generally tilted to the downside.
The IMF notes that fiscal fragilities in some advanced economies have come to the fore. The IMF estimates that debt-to-GDP ratios in advanced economies are expected to exceed 100 per cent of GDP in 2014. Australian government finances are dramatically stronger than in other advanced economies, with Australian government net debt peaking at levels around ten times lower than the major advanced economies.
The IMF has again emphasised the need for advanced economies to implement their stimulus plans in full in 2010 given the still fragile global recovery. However, it has recommended that most advanced economies should embark on significant fiscal consolidation in 2011.
In Australia stimulus is already being withdrawn as our economy strengthens. The withdrawal of fiscal stimulus is expected to detract around one percentage point from growth this year. This means that fiscal stimulus in Australia is being withdrawn faster than in most other advanced economies, and ahead of the timetable set by the IMF for other developed economies.
The IMF report also emphasises the medium-term challenges of rebalancing global demand to achieve sustainable growth. This is one of a number of issues that I will be working on with my fellow G20 colleagues this week at the G20 Finance Ministers' Meeting in Washington DC.
The G20 'Framework for Strong, Sustainable and Balanced Growth' is the vehicle through which members can achieve a structural rather than cyclical rebalancing of global patterns of consumption and saving.
G20 Finance Ministers will also continue work on financial regulation and reform of international financial institutions. This will bolster the capacity of the finance sector, the IMF and the World Bank to help avoid future destabilising behaviour.
It's strongly in Australia's interests to keep doing the hard work through the G20 to help build a lasting global recovery while maintaining the flexibility to do what is right for our own economy and for Australian families.
21 April 2010