IMF Executive Board Concludes 2016 Article IV Consultation with Australia
On February 3, 2017 the Executive Board of the International Monetary Fund (IMF) concluded the 2016 Article IV consultation with Australia.
Australia has enjoyed robust growth despite the commodity price and mining investment bust.
Nevertheless, Australia has not been immune to some elements of the “new mediocre.” Wage and price pressures have been weak, underemployment has risen, and private business investment outside mining has been lackluster.
With inflation below the target range of 2-3 percent and a downshift in the path of inflation expectation in 2016, the Reserve Bank of Australia (RBA) lowered its policy rate by another 50 basis points to 1.5 percent. Core inflation has since stabilized at around 1.6 percent.
Recent structural reforms have focused on fostering innovation. The National Innovation and Science Agenda (NISA) includes measures to boost innovation and entrepreneurship in the high-tech sector, including through tax breaks. Legislation is being prepared for key components of the Harper Review, which has identified a number of reforms to boost competition and productivity in the services sectors, and to strengthen competition policy broadly.
Executive Directors noted that Australia’s robust economic growth and low unemployment during the current terms-of-trade adjustment reflect the resilience of the economy and strong policy frameworks. While the balance of risks to the growth outlook has improved, there remain significant risks and uncertainties, notably weaker-than-expected domestic consumption, housing-related vulnerabilities, the rise in protectionist policies in the global economy, and a significant slowdown in Australia’s main trading partners. Against this background, Directors stressed the importance of maintaining supportive macroeconomic policies, addressing macro-financial vulnerabilities, and boosting long-term potential growth.
Press-release at the official IMF web-site