NO.031

IMF ENDORSES GOVERNMENT’S REFORM AGENDA

The IMF expects Australia’s strong economic performance to continue.

The Australian economy is forecast by the Fund to grow by 2.6 per cent in 2005

and by 3.3 per cent in 2006.

The IMF commends the Government’s budget management, stating that: “Fiscal

positions remain strong, characterized by budget surpluses and low and declining

government debt”. This provides a strong foundation for the economy to

respond to future economic shocks and meet the challenges posed by population

ageing.

While the IMF expects world growth to moderate after growing at its fastest

rate in around 30 years in 2004, the current expansion is expected to retain

significant momentum. World output is forecast by the IMF to expand at above-trend

rates of 4.3 per cent in 2005 and 4.4 per cent in 2006. Near-term risks highlighted

by the Fund to the global outlook include continued high and volatile oil prices

and an increased reliance on the United States and China as engines of growth.

The IMF draws attention to the medium-term challenges posed by global current

account imbalances, pointing out that to date, little progress has been made

in implementing policies to address structural weaknesses underpinning these

imbalances. The IMF’s key message is that countries should use the current

period of economic prosperity to press ahead with structural reforms which would

improve their capacity to respond to economic shocks and add impetus to economic

growth.

The IMF highlights that the pressures of an ageing population underscore:

“the need to press forward with reforms to increase labor participation;

boost productivity, which despite recent progress is still well below U.S. levels;

and keep health and pension spending on a sustainable path”. As the IMF

noted in its recent Article IV examination of Australia, implementation of the

Government’s reform agenda: “would move Australia to the forefront

of defining international best practice in the area of structural policies to

address the economic implications of ageing, as it is now in the area of macroeconomic

policies”.

The Government remains committed to sound macroeconomic policy frameworks

and to reforms which will sustain Australia’s remarkable economic performance.

CANBERRA

13 April 2005

Contact:

David Alexander

02 6277 7340