In its latest World Economic Outlook, the IMF expects the Australian economy to grow by 4.4 percent in 2007 and 3.8 per cent in 2008.This is above the IMF’s growth outlook for advanced economies. The IMF expects the unemployment rate to remain low in 2007 and 2008, at 4.4percent and 4.3percent respectively, and expects inflation to remain within the RBA’s target band.
The IMF notes Australia’s success in managing the impact of the improving terms of trade.The IMF states, “Flexible exchange rates and prudent fiscal policies have played central roles in managing the domestic impact of strong capital inflows and the improving terms of trade.”
The IMF forecasts the global economy to grow by 5.2 per cent in 2007 and 4.8 per cent in 2008.Growth in 2008 has been revised down by 0.4 of a percentage point due to the effects of recent financial market turbulence. In addition, the IMF notes that downside risks to this outlook have intensified.