NO.057

IMF WELCOMES IMPRESSIVE PERFORMANCE OF AUSTRALIAN ECONOMY

The IMF has released its annual assessment of the Australian economy today,

which welcomes:

“…the continued impressive performance of the economy, despite the

major external shocks that Australia has faced, and attributed this success

to the authorities’ skilful economic management.”

The IMF notes the Government’s policy actions over the past several years

have ‘significantly improved the domestic economic environment’ and have played

an important role in making the current economic expansion one of the longest

on record.

The IMF notes that the absence of imbalances in the domestic economy, combined

with sound policy decisions, have meant that Australia has been able to sustain

strong economic growth despite significant recent shocks in the global economy

– notably the Asian financial crisis and the synchronised world slowdown in

2001, including the recession in the United States. The IMF considers this to

be a major achievement, representing a ‘sharp departure from the economy’s previous

vulnerability to such shocks’.

The IMF expects the Australian economy to continue to grow strongly in 2002-03,

confirming Australia’s place as one of the world’s best performing developed

economies.

Looking further ahead, the IMF considers that the Government’s sound policy

framework and the lack of domestic imbalances have ‘laid the foundation’ for

sustainable high growth. The IMF expects the economic outlook for Australia

to remain very favourable over the medium term, with economic growth forecast

to remain solid and the unemployment rate to decline further. Inflationary pressures

are expected to be subdued, with inflation returning to around the mid-point

of the target band, and the current account deficit is forecast to narrow.

Notwithstanding the IMF’s assessment of the positive economic outlook, a number

of risks to the economic outlook have crystallised since the IMF undertook their

study of Australia. Significant drought is now affecting large parts of the

country and will reduce farm production in 2002-03. Despite this, with strong

economic fundamentals and the Government’s sound policy framework, the Australian

economy should continue to grow solidly.

The IMF also considers Australia’s current fiscal policy stance to be fundamentally

sound and notes that the Government is continuing to achieve its medium-term

fiscal strategy of budget balance, on average, over the economic cycle. The

IMF also commended the Government for producing the InterGenerational Report

and commencing a dialogue on the longer-term fiscal pressures associated with

the ageing of the population.

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

19 September 2002

Contact: Niki Savva

02 6277 7340