NO.015

IMF Commends Government’s Economic Management

The IMF has once again praised the economic management credentials of the

Government in its regular independent assessment of the Australian economy. The IMF’s

comments are contained in its latest review of the Australian economy, issued today (see

the attached Public

Information Notice). Reflecting the Government’s ongoing commitment to greater

transparency, the full IMF

Article IV staff report on the Australian economy is also being released today for the

first time.

In their assessment of the Australian economy, IMF Executive Directors noted that

‘prudent economic management had created a dynamic, flexible economy that was

well-positioned to withstand external shocks.’ They pointed to the narrowing of the

current account deficit, the apparently limited impact of the sharp currency depreciation

on balance sheets, and the generally strong financial sector indicators as evidence of

this.

The IMF also commended Australia’s ‘impressive’ productivity performance

– primarily resulting from ‘far-reaching structural reforms’ – and noted that

‘the second half of the 1990s has witnessed a sharp acceleration of labour

productivity growth’. The IMF expects the productivity gains from these reforms to

continue for some time and considers that Australia will benefit from pushing ahead with

the reform agenda.

The IMF’s assessment underscores the need for sound economic management amid

uncertain international economic developments. As the IMF indicates in its assessment,

this is what allowed Australia to insulate itself from the severe economic contraction

which enveloped our neighbours during the Asian financial crisis. Opportunism, like

proposals to roll back important structural reforms on tax, labour markets and welfare

would prove to be to Australia’s detriment. The Coalition is committed to the

continuation of sound economic management.

In terms of the economic outlook, the IMF expects Australia’s economic growth to

moderate in the year ahead, but domestic economic fundamentals to remain sound. The IMF

identifies overseas developments as the main downside risk to economic growth,

particularly the prospect of a hard landing in the US and a sharp slowdown in

Australia’s main export markets.

Nonetheless, IMF Executive Directors pointed out that, with tax cuts and increases in

welfare benefits delivering some fiscal stimulus to the economy, and with the competitive

exchange rate boosting net exports, economic growth prospects in the medium term remain

favourable.

The public release of the full Article IV staff report is consistent with the

Government’s continuing efforts to promote greater transparency and accountability.

It enhances Australia’s international credibility and builds on the substantial

contributions made by Australia in strengthening international financial architecture. The

full Article IV staff report can be found at the IMF’s website www.imf.org which can be

accessed through the Treasurer’s website.

CANBERRA

22 March 2001