IMF Says Stimulus Helps Buoy Australian GDP, Sees Room for More
Australian authorities limited the impact of the global recession with fiscal and monetary tools and have room to do more if they need to, the International Monetary Fund said.
“The sizable fiscal and monetary stimulus, a flexible exchange rate and a resilient banking sector should underpin a sustained recovery,” the IMF said in an e-mailed statement today. “Australia is in a strong position to deliver further macroeconomic policy stimulus if needed.”
The Washington-based lender expects gross domestic product to decrease 0.5 percent in 2009, compared with an April estimate of 1.4 percent. The economy will expand 1.5 percent next year, more than the earlier projection of 0.6 percent. The new forecasts were first released in June, after the staff completed the review for the annual evaluation.
Australia’s economy has so far outperformed most other developed nations, expanding 0.4 percent in the first quarter, as A$12 billion ($10.1 billion) in government handouts to households boosted consumer spending, which accounts for about 60 percent of gross domestic product. The central bank also cut its benchmark interest rate by a record 4 free credit report and score.25 percentage points between September and April.
At the same time, the “near-term outlook remains highly uncertain,” the IMF said, as household debt and short-term external borrowing “are high by advanced country standards.”
The IMF said executive directors “saw room for further policy rate cuts” and that “unconventional monetary policy easing measures, though unlikely to be needed, should remain the authorities’ toolkit.”
The Australian dollar is “broadly in line” with medium- term fundamentals, the lender said and that directors “considered that the flexible exchange rate policy provides a helpful buffer against external shocks.”
The IMF also said it would be “prudent” for Australian banking regulators to conduct stress tests “based on more extreme scenarios” than have already been performed “and to raise capital requirements if necessary.”
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