IMF SUPPORTS THE GOVERNMENT’S FOCUS ON BUILDING A STRONGER ECONOMY

The International Monetary Fund’s (IMF) annual assessment of Australia’s economy and key policy settings, has highlighted Australia’s strong economic record.

As noted by the IMF, the Australian economy has grown twice as fast as our international peers over the past two decades and our per capita income is among the highest in the world.

The IMF attributes Australia’s sustained economic success to sound policy frameworks, identifying our flexible exchange rate, credible monetary policy, strong institutions, sound financial sector supervision and transparent fiscal policy as key strengths.

The IMF has forecast Australia’s economic growth to strengthen from 2.5 per cent in 2015 to 3.0 per cent in 2016 and 3.1 per cent in 2017. The IMF expects economic growth to be driven by strong growth in exports, housing construction and non‑mining business investment. 

The IMF has endorsed the Government’s commitment to strengthen the budget and members of the IMF’s Executive Board supported Australia’s current fiscal consolidation path. A strong budget position and working to reduce Government debt underpins Australia’s AAA credit rating and the ability of both governments and the private sector to borrow at low rates.

However, as the IMF notes, sustaining the income growth that Australians have become accustomed to over recent decades will be challenging. The IMF emphasises that boosting prosperity and maintaining Australia’s position as one of the world’s leading economies will require action to increase productivity and help the economy capitalise on new and emerging opportunities.

The IMF recognises that changes to our tax system must work to promote economic growth and improve competitiveness. Our focus on tax must centre on economic growth and ensuring Australians can work, save and invest for their futures.

The IMF has also highlighted the importance of the Commonwealth and state governments continuing to increase investment in productive infrastructure and has welcomed the Government’s commitment to developing a pipeline of high-quality projects. The Government’s Asset Recycling Initiative and Northern Australia Infrastructure Facility provide significant scope for undertaking investment in high priority infrastructure projects as they are identified.

The IMF has supported key recommendations of the Harper Competition Policy Review and the Financial System Inquiry. The IMF also notes that Australia’s recently concluded free trade agreements with China, Japan and Korea will help to lift productivity and sustain strong income growth.

Overall, the IMF report is a welcome contribution that reinforces the importance of the Government’s commitment to a reform agenda based on innovation, creativity and productivity that harnesses opportunities and boosts national prosperity.