In its World Economic Outlook (WEO) update, the International Monetary Fund (IMF) has drastically revised down its forecast for the global economy since the November 2008 WEO update and has called for further action to support growth.
Against the sobering backdrop of a global recession and collapsing commodity prices, it is inevitable that Australian jobs and growth will be affected.
This update represents the third downward revision to IMF forecasts in just four months, demonstrating how rapidly the global economy is deteriorating.
While our economy is better placed than most other countries to face this crisis, we can't completely resist the pull of international economic forces.
The IMF is now forecasting that the global recession will be much deeper and more protracted than previously envisaged.
Global growth is now expected to fall to ½ per cent in 2009, with advanced economies expected to suffer their deepest recession since World War II. Collectively, advanced economies are expected to contract by 2 per cent in 2009 — the first annual contraction in the post‑war period.
Emerging economies are expected to slow sharply, growing by 3¼ per cent in 2009. The IMF has revised down its economic growth forecast for China in 2009 by almost 2 percentage points to 6.7 per cent — just half the rapid rate recorded in 2007.
The IMF also notes that the dramatic slowing in global growth has brought about a reversal of the global commodity prices boom, which has provided significant stimulus to Australia's economic growth in recent years.
The IMF has called on governments around the world to undertake further action to support economic growth. The IMF says "Monetary and fiscal policy need to become even more supportive of aggregate demand and sustain this stance over the foreseeable future, while developing strategies to ensure long-term fiscal sustainability."
The Rudd Government has taken decisive action to protect Australians from the worst impacts of the global recession through our Economic Security Strategy, guarantee of bank deposits and wholesale funding and nation building investments.
And the Government stands ready to take whatever further action is necessary and responsible to support jobs and growth in the face of the global recession.