The IMF in the September 2004 World Economic Outlook expects that Australia's strong economic performance will continue.
The IMF expects the Australian economy to record strong growth of 3.6 per cent in 2004 and 3.4 per cent in 2005. Economic growth is expected to be driven by strong exports and buoyant domestic demand, supported by continued low unemployment. The IMF acknowledge that Australia's fiscal position remains very strong, and that inflation remains subdued.
The IMF notes that the global recovery has become increasingly well established over the past year. Global GDP growth is now forecast to average 5 per cent in 2004 - the highest for nearly three decades - and a solid 4.3 per cent in 2005. The main areas of growth remain the US and East Asia, particularly China and Japan.
Notwithstanding this strong outlook, the IMF now considers that the near-term risks have increased, reflecting the recent strength of oil prices and weaker-than-expected data in the US and Japan. In addition, there are a number of medium-term challenges that need to be addressed to ensure the sustainability of the world economic recovery, including 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 success. While Australia's medium term prospects are favourable, the ageing of the population and preparing for the challenges it will bring is an area for continued reform.