NO.059

IMF EXPECTS THE AUSTRALIAN ECONOMY TO CONTINUE TO OUTPERFORM

The September 2002 IMF World Economic Outlook predicts that Australia’s economy will continue to perform strongly, with Australia’s economic growth forecast to remain one of the highest among the world’s advanced economies in both 2002 and 2003.

The IMF says that a combination of supportive macroeconomic policies, including a sound fiscal position, a competitive exchange rate, and higher housing wealth have underpinned the strong recent economic performance during a period of global economic weakness. The IMF projects that Australia’s strong economic growth will be accompanied by continued moderate inflation and underpin further declines in the unemployment rate. According to the IMF, in 2002 and 2003 Australia’s unemployment rate is likely to be below the average rate of the G7 and advanced economies.

The relatively up-beat assessment of Australia’s near-term prospects comes at a time of heightened global risks and uncertainties.

Following a bottoming in world growth in 2001, the IMF expects a gradual recovery in the global economy in 2002 and 2003. Despite a solid rebound in GDP growth in a number of economies in the first half of 2002, the IMF is now forecasting that the strength of the global rebound is likely to be more moderate than earlier expected, with risks to the outlook mainly on the downside. The IMF expects that the fall in equity markets, if sustained, and an unwinding of some other imbalances to temper the pace of the near-term global recovery.

The IMF has again noted the importance and benefits of economies adopting sound macroeconomic policy frameworks and sustained structural reform to strengthen resilience to future economic shocks. Australia’s progress on both counts means that it is well positioned to continue to perform strongly and withstand events such as the international downturn and the significant drought which is now affecting various parts of the country.

26 September 2002