NO.017

AUSTRALIAN ECONOMY TO REMAIN RESILIENT SAYS IMF

The IMF’s forecast in its April 2003 World Economic Outlook is

that Australia’s economic performance will keep it as one of the strongest economies

of the developed world in 2003 and 2004.

This is against the backdrop of a very weak and uncertain international

economy. And it also takes account of the worst drought in a century. The IMF

forecasts that the Australian economy will grow by a solid 3 per cent in 2003,

before rebounding to 3.7 per cent in 2004.

These forecast growth rates are stronger than most of the other

advanced economies, including the United States, the Euro area and Japan. According

to the IMF, this strong economic growth is expected to see the unemployment

rate continue to decline to below 6 per cent. Supporting the outlook for the

unemployment rate, the IMF notes that the Government’s “recently implemented

welfare reforms in Australia are expected to increase work incentives for the

unemployed”. Inflation is expected to remain moderate, comfortably within

the 2-3 per cent target band in both 2003 and 2004. The IMF also comments favourably

on Australia’s sound fiscal position.

The IMF expects recovery in the global economy during 2003 to

be more muted than previously expected, before picking up in 2004. This partly

reflects uncertainties associated with war in Iraq and the continued fallout

from the bursting of the equity market bubble. High oil prices and continued

weakness in equity markets are flattening consumer and business confidence.

The IMF says that while global industrial production has only recovered modestly,

consumption growth has eased and investment plans remain on hold. The IMF notes

that the pace of global recovery has slowed, particularly in industrial countries

and if uncertainty continues to dominate, the global recovery could slow even

further.

The IMF’s positive comments on Australia’s near-term prospects

are consistent with the OECD’s recent assessment of Australia as ‘one of the

best performers in the OECD’. In the light of the difficult world economy, Australia’s

performance is very strong.

Contact: Niki Savva

(02) 6277 7340