IMF sees Aust jobless rate at 7 per cent next year
By Colin Brinsden, Economics CorrespondentThu Oct 1 19:00:05 EST 2009
Thu Oct 1 09:00:05 UTC 2009
CANBERRA, Oct 1 AAP - The International Monetary Fund (IMF) has raised its forecasts for economic growth in Australia and predicted the unemployment rate will peak at 7.0 per cent next year.
In its latest World Economic Outlook released in Istanbul on Thursday, the IMF lifted its 2009 forecast for Australian gross domestic product (GDP) to growth of 0.7 per cent, from its previous estimate for a contraction of 0.5 per cent.
Australian is the only advanced economy expected to grow this year.
In 2010, the IMF sees local economy expanding by 2.0 per cent, compared to its previous estimate for growth of 1.3 per cent.
"The recent evolution of industrial production, retail sales, and confidence indicators suggests that Australia is on its way to recovery," the IMF said.
The global institution also raised its projections for world growth, but warned risks to the outlook remained on the downside.
"After a deep global recession, economic growth has turned positive, as wide-ranging public intervention has supported demand and lowered uncertainty and systemic risk in financial markets," it said.
However, it said the global recovery was expected to be slow as financial systems remained "impaired", support from governments would gradually have to be withdrawn, and households that suffered from "asset price bursts" would continue to rebuild their savings.
"Premature exit from accommodative monetary and fiscal policies is a particular concern because the policy-induced rebound might be mistaken for the beginning of a strong recovery," it said.
It now expects world growth to contract by 1.1 per cent in 2009, up from its previous forecast for 1.4 per cent negative growth.
For 2010, it forecasts growth expanding by 3.1 per cent in 2010, also an upgrade of 0.6 percentage points.
Advanced economies are now forecast to contract by 3.4 per cent in 2009 compared to 3.8 per cent previously, before growing by 1.3 per cent in 2010, an upgrade of 0.7 percentage points.
On Australia, the IMF said "sound macro economic and regulatory frameworks" put in place during a prolonged period of prosperity allowed ample room to implement expansionary policies to limit the damage from the global recession and to support the recovery as needed.
A floating exchange had also acted as a shock absorber to mitigate the impact of "external shocks".
"In the event that recovery falters (Australia) will have further room for stimulus, both monetary and fiscal," it said.
But, it said, the economy still faced challenges with the need for strategies to unwind expansionary policies and to further strengthen financial supervision and regulation.
In particular, there needed to be liquidity guidelines to encourage banks to reduce their reliance on short-term wholesale funding.
It also warned that Australia's sizable current account deficit made it more vulnerable than a number of other advanced economies to a weakening in investor confidence.
It expects the deficit to widen to 5.6 per cent of GDP in 2010 after narrowing to 3.2 per cent in 2009.
Still, it expects inflation to be subdued with consumer prices growing by 1.6 per cent in 2009 and 1.5 per cent in 2010, below the Reserve Bank of Australia's two to three per cent target.
The jobless rate is forecast to peak at 6.0 per cent this year and 7.0 per cent in 2010, well below the government's 8.25 per cent estimate for June next year that was made in the May budget.
