The IMF has delivered another clear endorsement of the Rudd Government's actions to combat the global recession in its Article IV consultation statement released today.
This statement provides yet more evidence that the Government's policy efforts are working to position Australia as among the strongest economies in the developed world.
In particular the IMF has strongly commended the Government's three-stage stimulus strategy, starting with direct payments, moving to shovel-ready infrastructure, followed by major nation-building projects to support jobs and strengthen the economy for the future.
The IMF notes: "We welcome the quick implementation of targeted and temporary fiscal stimulus. The stimulus provides a sizeable boost to domestic demand in 2009 and 2010 that will cushion the impact of the global recession. The transfers to households had an immediate impact on activity that helped underpin confidence. The increase in public investment will continue to support activity in the near term, while addressing infrastructure shortfalls."
The IMF has also commended the Government's commitment to return the Budget to surplus, noting that "few other advanced economies have adopted such a clear commitment."
The IMF statement praises the Government and Reserve Bank's actions to strengthen the financial sector. It notes that the Government's bank guarantees have bolstered confidence in the financial system and allowed credit to continue to flow to the economy during the global financial crisis. This has supported jobs and business activity at a very challenging time.
The statement makes clear that the decisive policy response by the Government and the Reserve Bank has helped Australia to weather the global storm better than nearly all other countries.
The statement notes that while global events have slowed Australia's economic growth, "the downturn has been milder than in most other advanced economies. This is because of strong commodity exports, a flexible exchange rate, a healthy banking sector, and a timely and significant macro policy response".
The IMF is projecting that GDP for Australia will decline by ½ per cent in 2009, rebounding to about 1½ per cent in 2010. This compares to the IMF's April forecast for advanced economies of -3.8 per cent in 2009 and flat growth in 2010.
The IMF has also strongly endorsed Australia's fiscal strategy and the sustainability of our fiscal position.
This endorsement comes just hours after the OECD's Economic Outlook confirmed that Australia has the strongest performing economy in the OECD, with lower debt and lower deficits than any major advanced economy.
The IMF states that projected budget deficits are appropriate in current circumstances. The IMF also notes that Commonwealth government debt is projected to remain low compared with other advanced economies.
The Government fully agrees with the IMF's assessment that there is a need for continued prudence – this underpins our fiscal strategy as set out in the Budget.
This IMF statement follows the IMF Staff Mission to Australia for its Article IV consultation which took place from 12 to 23 June. The Government warmly welcome the release of this statement, which is in line with our support for enhanced transparency of the IMF's bilateral surveillance process. The release of the corresponding statement last year was the first time an Australian Government authorised the release of an IMF consultation statement.
The IMF Executive Board is expected to discuss an IMF staff report on Australia's Article IV consultation in August.
25 June, 2009