In its latest World Economic Outlook, the International Monetary Fund expects the Australian economy will continue to perform strongly, growing by 2.9 per cent in 2006 and 3.2 per cent in 2007. The IMF expects unemployment to remain at around its current low level over this period, and inflation to remain moderate.
The IMF praises the state of Australia's public finances, noting that Australia continues to demonstrate an enviable' record of fiscal prudence with the budget remaining in surplus and public debt ratios staying on a firm downward track. The IMF welcomes the Government's workplace relations reforms and changes to the tax and benefits systems, pointing out that these will improve work incentives, and set the stage for continued strong employment growth'.
Favourable global conditions should continue to support Australia's economy. The IMF has strengthened its forecasts since the September 2005 World Economic Outlook and is forecasting global growth of 4.9 per cent in 2006 and 4.7 per cent in 2007. While high and volatile oil prices remain a significant risk to world growth, the Fund notes that higher oil prices have not yet significantly impacted on inflationary expectations. The Fund highlights the importance of credible monetary policy frameworks in keeping inflationary expectations in check and the need to improve the supply-demand balance in oil markets.
The IMF again draws attention to global current account imbalances and reiterates the need for policy responses across a large number of countries to facilitate the orderly adjustment of these imbalances, including: fiscal consolidation and measures to increase private savings in the US, structural reforms to boost growth in Japan and Europe, deeper financial and corporate sector reform in key Asian economies and increased investment in oil-exporting countries.
The Government remains committed to sound macroeconomic policy frameworks and to reforms which will sustain Australia's strong economic performance.