The International Monetary Fund has today reiterated its strong endorsement of the Government's economic stewardship and confirmed that the fundamentals of the Australian economy remain strong, despite increased global instability.
The IMF confirms that Australia's low unemployment, strong fiscal position and bright medium-term prospects stand us in stark contrast to many advanced economies.
"Australia's performance since the onset of the global financial crisis has been enviable. It was one of the few advanced economies to avoid a recession in recent years, reflecting its strong position at the onset of the crisis and a supportive macro policy response."
While we are not immune, the IMF confirms that our successful response to the global financial crisis and strong fundamentals mean we are better placed than most other advanced economies to deal with the global instability.
"If global financial markets become severely disrupted or world growth falters, macroeconomic policy is well positioned to respond."
Consistent with its September World Economic Outlook update, the IMF projects real GDP growth of 3.3 per cent in 2012, faster than its forecasts for any of the major advanced economies.
The IMF once again commends the Government's policy settings and fiscal strategy, saying the plan to return the budget to surplus in 2012-13 "should take some pressure off monetary policy and the exchange rate."
It also endorses key elements of the Government's reform agenda to maximise the benefits and tackle the challenges of mining boom mark II, including our tax and superannuation reforms, critical investments in skills and training, and reforms to boost workforce participation.
The IMF supports Australia's introduction of a carbon price as a transition to an emissions trading system, and commends carbon pricing policies as the most effective and cost effective way to reduce carbon pollution. It also supports the Government's plan to help households adjust through tax reform.
In supporting continued tax reform, the IMF welcomes the progress made to date in adopting recommendations from Australia's Future Tax System Review. It underlines the Government's reform efforts to increase labour supply, including reducing marginal tax rates for single parents and phasing out the dependent spouse offset.
The IMF has again highlighted the resilience of Australia's banking sector, praising the Australian Prudential Regulatory Authority for its sound supervisory and regulatory approach, and underscoring the role of the Government's Competitive and Sustainable Banking package in contributing to an increase in mortgage refinancing.
The annual Article IV Staff Report follows the statement issued at the conclusion of the IMF's consultations in Australia in August. The release of the report is consistent with the Government's support for enhanced transparency of the IMF's bilateral surveillance process.
The report is a timely reminder of Australia's strong fundamentals given the recent heightened concerns about the global economic outlook. While Australia is not immune to volatile global conditions, we can't lose sight of our impressive economic credentials and our proven track record of dealing effectively with global instability.