The International Monetary Fund has overnight strongly endorsed the Gillard Government's responsible economic and fiscal management, and confirmed our nation's outlook remains strong despite renewed fragility in the global economy.
The IMF's views are yet another resounding endorsement of the Government's reform agenda to build the high-skilled, high-productivity, low-pollution economy we need for the future.
The IMF commends the Government's fiscal strategy to return the Budget to surplus in 2012‑13 despite the impact of natural disasters, highlighting that Australia's fiscal consolidation is "faster than in many other advanced economies and is more ambitious than earlier envisaged".
The statement also makes it clear that our record fiscal consolidation will "take some pressure off monetary policy and the exchange rate," underscoring the fact that the Government is making room for a strengthening economy and not adding to price pressures.
The IMF gives strong support to key elements of the Government's reform agenda to maximise the benefits and address the challenges of mining boom mark II, including our tax and superannuation reforms, critical investments in skills and training, and reforms to boost participation.
In supporting continued tax reform, the IMF has welcomed the progress made to date in adopting recommendations of the tax review, including reducing the company tax rate, introducing the minerals resource rent tax, and the steps to reduce effective marginal tax rates for low‑income earners.
The leading global economic institution also joins the list of credible voices that endorse the introduction of a carbon price, saying that they "support the proposed introduction of a carbon price as part of a transition to a permits trading system to mitigate greenhouse gas emissions".
The IMF also supports the Government's plan to assist households through tax reform, noting that the increase in the tax-free threshold "should relieve an extra one million Australians from the need to lodge an income tax return and boost labour force participation".
The measures that formed a core part of the Budget are also welcomed, with the statement praising the "steps taken to invest in skills training, which should help workers improve their mobility and income prospects."
The IMF has again backed the strength of Australia's banking sector. It notes that banks have improved their capital positions and reduced their reliance on short-term foreign funding, and that they are well placed to ride out any future financial turbulence in offshore markets.
The statement also highlights the role of the Government's Competitive and Sustainable Banking package in "addressing funding diversity, stability and bank competition."
The IMF sees the economic outlook for Australia as favourable, led by private investment in mining and commodity exports, and expects strong commodity demand to be long lasting because of favourable prospects for sustained growth in emerging Asia, including China.
The IMF projects real GDP growth of 2 per cent for calendar year 2011 and 3½ per cent in 2012, with the unemployment rate remaining below 5 per cent.
Consistent with the Budget forecasts, the IMF expects Australia's economic growth to strengthen as we recover from the recent natural disasters and the investment boom gathers pace.
The statement follows the visit by the IMF staff mission to Australia for the annual Article IV consultation between 22 July and 2 August. The release of the statement is consistent with the Government's support for enhanced transparency of the IMF's bilateral surveillance process.
The IMF's views are a timely reminder of Australia's strong fundamentals given the recent heightened concerns about the global economic outlook.
Australia is not immune from developments in the rest of the world, but we should never forget our economic credentials are among the strongest in the world.
7 August 2011