Economic updates released by the IMF overnight have revised upwards growth forecasts for the global economy, as well as key economies such as China, while confirming Australia has the strongest performing economy of any major advanced economy.
The IMF has also delivered another endorsement of economic stimulus, noting that "macroeconomic risks have eased in response to concerted fiscal and monetary policy stimulus measures."
In an update to its last World Economic Outlook, the IMF has forecast the Chinese economy will grow by 7.5 per cent in 2009, revised up from 6.5 per cent. It then expects growth of 8.5 per cent in 2010, revised up from 7.5 per cent.
However the IMF has cautioned that the global recession still has some way to run, with major contractions still expected particularly in advanced economies.
The IMF expects the world's advanced economies to contract by a massive 3.8 per cent in 2009 before recovering by a modest 0.6 per cent in 2010.
The IMF forecasts the US economy will contract by 2.6 per cent in 2009, revised up slightly from 2.8 per cent. It then expects the US economy to grow by 0.8 per cent in 2010, revised up from zero growth.
The IMF forecasts the global economy to contract by 1.4 per cent in 2009 – the biggest contraction since World War Two. It then expects a return to growth in 2010, with the global economy growing by 2.5 per cent. This is an upgrade from the 1.9 per cent growth in 2010 that the IMF forecast in its last World Economic Outlook in April.
Australia's GDP is forecast to fall by 0.5 per cent in 2009 before increasing by 1.3 per cent in 2010. This outlook remains unchanged from the IMF's forecasts in its recent Article IV Consultation with Australia released on 25 June.
The IMF also released overnight an update to its Global Financial Stability Report and published a note on global economic prospects that had previously been presented to the meeting of G-20 Deputies in Basel on 27 June. This G-20 note confirms that Australia is expected to have higher growth than any major advanced economy over the next 18 months.
The IMF updates overnight reinforce recent reports from the IMF and the OECD clearly indicating that the Rudd Government's economic stimulus measures have helped deliver stronger growth, lower debt and lower deficits than any major advanced economy.
In its recent Article IV report specifically, the IMF "welcome[d] the quick implementation of targeted and temporary fiscal stimulus." It noted that the Rudd Government's stimulus "provides a sizable boost to domestic demand in 2009 and 2010 that will cushion the impact of the global recession."
The Article IV report also noted that "the Government's commitment to return to surpluses and achieve a positive budget balance on average over the medium-term is commendable", and that "few other advanced countries have adopted such a clear commitment".
Although the IMF in its updates overnight cautions against the early withdrawal of fiscal stimulus measures, it also calls for international cooperation in developing careful exit strategies for when "growth is firmly re-established".
It notes that "[e]ven though the time has not yet come to start withdrawing all the various forms of official support that have been extended in response to the crisis, it is important that carefully considered and coordinated exit strategies are in place."
As the Prime Minister said in Germany on Tuesday night, Australia strongly agrees with the need for a coordinated, multilateral approach to the eventual withdrawal of policy measures that have been put in place to combat the global financial crisis.
The Government has been particularly active through the G-20 in encouraging international policy cooperation and reform of the global financial architecture.
As the IMF reports make clear, the global recession still has some way to run and Australia is clearly not immune from its ongoing impacts, particularly rising unemployment.
However, as is now evident, the Government's policies are clearly working to cushion the Australian economy from the worst effects of the global recession.
9 July 2009