The International Monetary Fund (IMF) has recognised Australia’s sound economic fundamentals in its annual assessment of the Australian economy and expects economic growth to be “supported by monetary policy easing, tax cuts, and the recovery of housing markets”.
However, the IMF also points out that the Australian economy faces a number of challenges including travel disruptions from the recent Coronavirus outbreak.
Against that backdrop, the Australian economy remains remarkably resilient. We are in our 29th year of consecutive economic growth, a record unmatched by any other developed nation, with the IMF forecasting Australia to grow faster than the United States, Canada, Japan, France, Germany and the United Kingdom in 2021.
The IMF believes that Australia’s fiscal policy is appropriately expansionary in 2019-20 and endorses the Government’s strategy of cutting taxes and boosting infrastructure. Responsible budget management has allowed us to deliver the first balanced budget in 11 years and has given us the ability to respond to economic shocks without increasing taxes or cutting essential services.
Importantly the Government’s low and middle income tax offsets have seen over 8 million Australians receive more than $6 billion in additional income over the last 6 months, contributing to the fastest increase in household disposable income in over five years.
The IMF finds that Australia’s economic momentum has resulted in improvements in labour market conditions and ongoing employment growth is expected to support a modest pick-up in wages.
We have created more than 1.5 million jobs since we came to office, workforce participation is around record highs and welfare dependency at its lowest level in three decades.
The IMF also notes that we are seeing continued improvements in the housing market after cooling through mid-2019, and “a rapid recovery in the housing market could boost private consumption and residential investment” with the December quarter 2019 national accounts showing that household consumption contributed 0.2 percentage points to growth with 5 out of 7 discretionary consumption categories growing over the quarter.
Importantly, the IMF welcomes Australia’s macroprudential settings which have been “effective in reducing riskier mortgage loans”. Australia’s banking sector remains “adequately capitalized and profitable” and Australia benefits from a “robust regulatory framework”.
Australia approaches the challenges ahead from a position of economic strength with the Coalition Government’s economic plan and responsible budget management contributing to the resilience of the Australian economy.