The IMF has once again praised the economic management credentials of the Government in its regular independent assessment of the Australian economy. The IMFs comments are contained in its latest review of the Australian economy, issued today (see the attached Public Information Notice). Reflecting the Governments ongoing commitment to greater transparency, the full IMF Article IV staff report on the Australian economy is also being released today for the first time.
In their assessment of the Australian economy, IMF Executive Directors noted that prudent economic management had created a dynamic, flexible economy that was well-positioned to withstand external shocks. They pointed to the narrowing of the current account deficit, the apparently limited impact of the sharp currency depreciation on balance sheets, and the generally strong financial sector indicators as evidence of this.
The IMF also commended Australias impressive productivity performance - primarily resulting from far-reaching structural reforms - and noted that the second half of the 1990s has witnessed a sharp acceleration of labour productivity growth. The IMF expects the productivity gains from these reforms to continue for some time and considers that Australia will benefit from pushing ahead with the reform agenda.
The IMFs assessment underscores the need for sound economic management amid uncertain international economic developments. As the IMF indicates in its assessment, this is what allowed Australia to insulate itself from the severe economic contraction which enveloped our neighbours during the Asian financial crisis. Opportunism, like proposals to roll back important structural reforms on tax, labour markets and welfare would prove to be to Australias detriment. The Coalition is committed to the continuation of sound economic management.
In terms of the economic outlook, the IMF expects Australias economic growth to moderate in the year ahead, but domestic economic fundamentals to remain sound. The IMF identifies overseas developments as the main downside risk to economic growth, particularly the prospect of a hard landing in the US and a sharp slowdown in Australias main export markets.
Nonetheless, IMF Executive Directors pointed out that, with tax cuts and increases in welfare benefits delivering some fiscal stimulus to the economy, and with the competitive exchange rate boosting net exports, economic growth prospects in the medium term remain favourable.
The public release of the full Article IV staff report is consistent with the Governments continuing efforts to promote greater transparency and accountability. It enhances Australias international credibility and builds on the substantial contributions made by Australia in strengthening international financial architecture. The full Article IV staff report can be found at the IMFs website www.imf.org which can be accessed through the Treasurers website.