NO.022

IMF PREDICTS CONTINUED STRONG GROWTH FOR THE AUSTRALIAN

ECONOMY

The IMF in the April 2004 World Economic Outlook expects that

Australia’s strong economic performance will continue.

The IMF expects the Australian economy to record strong growth

of 3.5 per cent in 2004 and 3.6 per cent in 2005. Low unemployment is expected

to support growth in household spending. Inflation is expected to remain within

the 2 to 3 per cent target band. The IMF notes that Australia’s fiscal

position remains strong, and that bank, corporate and household balance sheets

remain generally sound.

With the global recovery strengthening and broadening, the IMF has significantly

revised up its growth forecasts since the previous WEO in September 2003. World

GDP is forecast to grow by 4.6 per cent in 2004 (from 4.1 per

cent in the previous WEO) and by 4.4 per cent in 2005. This revision reflects

an improved outlook for the United States, Japan and East Asia. Although the

near-term outlook is positive, there are a number of challenges and risks to

the medium-term outlook, which need to be addressed to ensure the sustainability

of the recovery. These risks include global imbalances in current account positions

and managing the transition to less accommodative macroeconomic policies.

The IMF is encouraging countries to use the world recovery to

push forward on structural reforms and to implement a credible strategy to achieve

fiscal consolidation over the medium term. The Government’s commitment

to reform and sound macroeconomic policy frameworks has been a key to Australia’s

relative stability. While Australia’s medium term prospects are favourable,

the IMF points to the fiscal pressures arising from an ageing population as

an area for continued reform.

Contact: David Alexander

Treasurer’s Office

(02) 6277 7340