The IMF in the April 2004 World Economic Outlook expects that Australia’s strong economic performance will continue.
The IMF expects the Australian economy to record strong growth
of 3.5 per cent in 2004 and 3.6 per cent in 2005. Low unemployment is expected
to support growth in household spending. Inflation is expected to remain within
the 2 to 3 per cent target band. The IMF notes that Australia’s fiscal
position remains strong, and that bank, corporate and household balance sheets
remain generally sound.
With the global recovery strengthening and broadening, the IMF has significantly
revised up its growth forecasts since the previous WEO in September 2003. World
GDP is forecast to grow by 4.6 per cent in 2004 (from 4.1 per cent in the previous WEO) and by 4.4 per cent in 2005. This revision reflects an improved outlook for the United States, Japan and East Asia. Although the near-term outlook is positive, there are a number of challenges and risks to the medium-term outlook, which need to be addressed to ensure the sustainability of the recovery. These risks include global imbalances in current account positions and managing the transition to less accommodative macroeconomic policies.
The IMF is encouraging countries to use the world recovery to push forward on structural reforms and to implement a credible strategy to achieve fiscal consolidation over the medium term. The Government’s commitment to reform and sound macroeconomic policy frameworks has been a key to Australia’s relative stability. While Australia’s medium term prospects are favourable, the IMF points to the fiscal pressures arising from an ageing population as an area for continued reform.