Peter Costello

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IMF Welcomes Impressive Performance of Australian Economy



The IMF has released its annual assessment of the Australian economy today, which welcomes:

"Â…the continued impressive performance of the economy, despite the major external shocks that Australia has faced, and attributed this success to the authorities' skilful economic management."

The IMF notes the Government's policy actions over the past several years have 'significantly improved the domestic economic environment' and have played an important role in making the current economic expansion one of the longest on record.

The IMF notes that the absence of imbalances in the domestic economy, combined with sound policy decisions, have meant that Australia has been able to sustain strong economic growth despite significant recent shocks in the global economy - notably the Asian financial crisis and the synchronised world slowdown in 2001, including the recession in the United States. The IMF considers this to be a major achievement, representing a 'sharp departure from the economy's previous vulnerability to such shocks'.

The IMF expects the Australian economy to continue to grow strongly in 2002-03, confirming Australia's place as one of the world's best performing developed economies.

Looking further ahead, the IMF considers that the Government's sound policy framework and the lack of domestic imbalances have 'laid the foundation' for sustainable high growth. The IMF expects the economic outlook for Australia to remain very favourable over the medium term, with economic growth forecast to remain solid and the unemployment rate to decline further. Inflationary pressures are expected to be subdued, with inflation returning to around the mid-point of the target band, and the current account deficit is forecast to narrow.

Notwithstanding the IMF's assessment of the positive economic outlook, a number of risks to the economic outlook have crystallised since the IMF undertook their study of Australia. Significant drought is now affecting large parts of the country and will reduce farm production in 2002-03. Despite this, with strong economic fundamentals and the Government's sound policy framework, the Australian economy should continue to grow solidly.

The IMF also considers Australia's current fiscal policy stance to be fundamentally sound and notes that the Government is continuing to achieve its medium-term fiscal strategy of budget balance, on average, over the economic cycle. The IMF also commended the Government for producing the InterGenerational Report and commencing a dialogue on the longer-term fiscal pressures associated with the ageing of the population.

The full Article IV staff report can be found at the IMF's website which can be accessed through the Treasurer's website.

19 September 2002

Contact: Niki Savva
02 6277 7340

19 Sep 2002

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