IMF report Prime Minister reaction

Prime Minister Julia Gillard says a global forecast that slashes Australia’s growth rate is “a ringing endorsement” of the local economy.

The International Monetary Fund, in its latest World Economic Outlook, predicts the Australian economy will grow at only 1.8 per cent this year, down from its previously forecast 3 per cent.

But it also says Australia is in about the best fiscal position of any developed country in the world.

Ms 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 the Nine Network.

The IMF said Australia could look forward to growing faster than any other major advanced economy, Ms Gillard noted.

Advanced economies are expected to grow by an anaemic 1.6 per cent this year and 1.9 per cent next year, a forecast the prime minister said was “a stark warning”.

Global growth will drop to four per cent, down from 5.1 per cent last year.

However, the Asia-Pacific region is in a better position to face current global risks, the IMF says.

“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.

“There’s nowhere else in the world you’d rather be than in Australia as the global economy goes through this phase,” Ms Gillard said.

The prime minister defended the timing of her government’s decision to introduce taxes on carbon pollution and mining profits, especially when the local economy was operating at two speeds.

The minerals resource rent tax would take some more tax from that bit of the economy that was “charging ahead” and using it to support growth by cutting company tax and helping small business.

“So that’s definitely the right economic policy now,” Ms Gillard said.

As for the carbon tax, now was the time to get started on meeting 2020 emissions reduction targets.

“The sooner we start, the easier it will be to do, the easier the economic adjustment,” Ms Gillard said.

Treasurer Wayne Swan was singing from the same song sheet as his leader, describing the IMF report as “a ringing endorsement” of the Australian economy.

He played down the fund’s lower growth forecast, saying it was a slight downgrade on the budget forecast of 2.25 per cent.

“But that simply relates to the bigger-than-expected impact of the natural disasters in Australia earlier this year,” he told ABC Radio.

“The fact is the underlying strength of our economy is recognised by the IMF.”

Australia was “very well placed to handle the worst the world could throw at us”, the treasurer said.

Mr Swan, named the world’s best finance minister overnight, intends to deliver a blunt message to a meeting of his G20 colleagues in Washington later in the week.

“I will certainly be making the point that it’s very important that the Europeans gets their act together,” he said.

“There’s no doubt political inaction lies at the core of this challenge in both Europe and the United States.”

Australia, on the other hand, was free of political gridlock, Mr Swan said.

Labor backbencher Andrew Leigh said the government will still return the budget to surplus in 2012/13 despite the IMF’s growth forecasts.

A slowdown in the economy could hinder the government’s attempt to return the budget to surplus as tax receipts would be less than previously forecast.

“We will meet that commitment,” Dr Leigh told reporters in Canberra.

“But it is important to recognise that we are affected by world events.”

Leave a Reply

Your email address will not be published. Required fields are marked *