NO.020

EMBARGO – 1.00am WEDNESDAY 21 April9

IMF World Economic Outlook

The IMF has confirmed the favourable outlook facing the Australian economy.

The IMF has revised up its growth forecasts for Australia. In its World Economic

Outlook, the IMF forecasts Australian growth of 3.1 per cent in calendar year

1999 and 3.2 per cent in 2000. These figures imply financial year forecasts of

around 4 per cent in 1998-99 and 2- per cent in 1999-2000,

suggesting that the MYEFO forecast for 1998-99 will be easily achieved. For 1999-2000, the

IMF’s forecast is the same as the MYEFO forecast.

The IMF expects world growth to remain relatively weak in 1999, similar to that in

1998, before recovering solidly in 2000. In 1999, world economic growth will continue to

be supported by strong growth in the US and Europe, although less than in 1998, while

economic contraction in Japan is expected to moderate. The IMF notes that activity in the

Asian crisis economies is close to its trough, with GDP growth expected to strengthen over

1999 and 2000.

Against this backdrop, economic growth in Australia is expected to moderate. This is

also reflected in the Government’s forecasts. The difficult international environment

clearly points to the need to maintain the pace of economic reform to further strengthen

the Australian economy.

The IMF report notes the success of the strong marketing efforts of our exporters in

redirecting commodity exports to markets outside Asia.

The IMF also notes the need to maintain fiscal discipline, stating that ‘high

priority must continue to be attached to raising national saving, given Australia’s

large external liabilities, which precludes discretionary fiscal easing beyond the

personal income tax cuts in the tax reform package to be implemented next year’.

21 April 1999