The International Monetary Fund (IMF) has cut its world growth forecast and has warned that the global economy has entered a ‘dangerous new phase’, although the Asia Pacific region is in a better position to face the risks.
The IMF has said the Asia Pacific region is in a better position to face current global risks.
As per the IMF, last summer’s natural disasters had temporarily slowed Australia’s economic growth, and despite earthquakes, New Zealand’s recovery had gained traction, “supported by strong terms of trade and positive trade spillovers from the region”.
Yet the IMF has slashed Australia’s growth forecast to 1.8 per cent for 2011, from a 3.0 per cent prediction made in April, and to 3.3 per cent for 2012, from 3.5 per cent.
But it also says Australia is in about the best fiscal position of any developed country in the world.
Prime Minister Julia Gillard seized on that aspect of the report when asked how the government intended to protect Australia from what the IMF warns is a ‘dangerous new phase’ for the global economy. “It also gives a ringing endorsement to the Australian economy,” she told an Australian Network.
The IMF said Australia could look forward to growing faster than any other major advanced economy, Ms Gillard noted.
“We are in the part of the world that is growing,” Ms Gillard said, adding Australia also had low unemployment, strong public finances and ‘a huge pipeline of growth’ coming into the resources sector.
The IMF also welcomed Australia’s planned return to a budget surplus in 2012/13, saying it would increase the economy’s ‘fiscal room’, while taking pressure off monetary policy and the exchange rate. “The mining boom also provides an opportunity to build fiscal buffers further over the medium term and contribute to national saving,” it says.