Peter Costello

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IMF Predicts Favourable Economic Prospects for Australia

NO.028

IMF Predicts Favourable Economic Prospects for Australia

The IMF has confirmed that Australia’s economic fundamentals remain sound.

In its latest World Economic Outlook (WEO), the IMF expects world activity in 2001 to be weaker than previously indicated, forecasting growth of 3.2 per cent. Contributing to the weaker outlook is a greater-than-expected slowdown in the United States, weaker though still solid growth in Europe, a deterioration in the outlook for Japan and slower growth in Non-Japan East Asian countries.

The IMF maintains that there are reasonable prospects that the international slowdown will be short-lived, with growth expected to pick up to 3.9 per cent in 2002.

Against the backdrop of a weaker external environment, and the temporary weakness in the domestic housing sector, the IMF has forecast economic growth in Australia of 1.9 per cent in 2001. This follows Australia’s impressive economic performance over recent years, recording very strong growth with low inflation. Reflecting the strength of Australia’s economic fundamentals, the IMF has forecast a solid rebound in economic growth of 3.5 per cent in 2002, with the unemployment rate resuming its downward trend.

The IMF also suggests that the very solid rebound in Australian economic growth is expected to continue to occur in combination with low ongoing inflation. In 2002, the IMF expects consumer prices to increase by 2.4 per cent, firmly within the Reserve Bank of Australia’s medium-term inflation target band. Australia’s current account deficit is also expected to decline over 2001 and 2002.

The IMF notes that the fall in the value of the Australian dollar over the last year has partly reflected the strength of the US dollar. The IMF also points out that, against the backdrop of sound fundamentals and favourable economic prospects, the main driving forces underpinning the Australian dollar in the past do not appear to explain its recent movements.

The IMF also highlighted Australia’s success in completing major tax reform and its recent enactment of measures aimed at fostering innovation.

The Treasurer will attend the Spring Meetings of the IMF and World Bank in Washington on 29-30 April 2001. The discussion at these meetings will include the world economic outlook, poverty, growth and crisis prevention as well as recent developments at the IMF and World Bank.


CANBERRA
26 April 2001

26 Apr 2001

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