The Reserve Bank of Australia (RBA) has enough scope to deal with price pressures in the local economy without raising its target for inflation and hence interest rates, economists say.

The International Monetary Fund (IMF) said in a paper `Rethinking Macroeconomic Policy’ over the weekend that policy makers could consider raising their target for inflation to four per cent.

The reason behind it was that there would be more room to cut interest rates to stimulate economies when economic shocks occur.

Many central banks of industrialised nations have inflation targets around two per cent.

The RBA uses monetary policy, or interest rates, to target an inflation rate of two to three per cent, on average, over the economic cycle.
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Australia looks set to continue as one of the world’s strongest economic performers, with the International Monetary Fund (IMF) predicting it will do better than expected in the next two years.

The IMF in its latest World Economic Outlook released overnight forecasts a strengthening global economy, now expecting growth of 3.9 per cent this year, following an unprecedented contraction of 0.8 per cent last year.

It says the Australian economy grew by just under one per cent in 2009, but predicts stronger results in 2010 and 2011, reflecting improved prospects for the global economy and the stronger-than-expected performance of the Australian economy in recent months.

The IMF now forecasts that Australia will grow by two per cent in 2010 and three per cent in 2011.

“This is considerably stronger than the recovery forecast for other advanced economies, which are expected to grow by 2.1 per cent in 2010 and 2.4 per cent in 2011,” federal Treasurer Wayne Swan said in a statement on Wednesday.
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The global economic recovery remains fragile and stimulatory policies should stay in place until it is firmly established, says International Monetary Fund (IMF) managing director Dominique Strauss-Kahn.

Mr Strauss-Kahn made the comments in delivering the annual lecture of the Monetary Authority of Singapore on Friday.

“While I am hopeful that the global economy has turned the corner, the recovery remains fragile.

“Policymakers should therefore keep supportive measures in place until a recovery is firmly established and conditions for unemployment to recede are in place,” he said.

Crisis support policies may need to be wound back in some emerging markets, including some in Asia, where the recovery is “further along”.
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Australia has avoided a recession due to its “timely and forceful” policy response and strong commodity exports to China, the IMF says.

But the International Monetary Fund (IMF) says Australia and its Asia-Pacific partners face two major challenges to overcome a “new world” of slower demand from major economies.

In its latest Regional Economic Outlook for the Asia and the Pacific released on Thursday in Seoul, it says these economies in the near term need to manage a “balancing act”.

“… providing support to the economy until the recovery is sufficiently robust and self-sustaining while ensuring that the support does not ignite inflationary pressures or concerns over fiscal sustainability,” it said.
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The IMF has raised its economic growth forecast for Australia and predicts unemployment will reach 7.0 per cent next year, substantially less than the government’s current projection.

In its latest World Economic Outlook released in Istanbul on Thursday, the International Monetary Fund (IMF) jacked up its Australian gross domestic product (GDP) 2009 forecast to 0.7 per cent growth, having previously expected a 0.5 per cent contraction.

It was the only advanced economy expected to grow this year.

For 2010, it expects the economy to expand by 2.0 per cent, up from its previous estimate of 1.3 per cent growth.
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The IMF has backed the Reserve Bank of Australia’s (RBA) intention to lift the cash rate in coming months and not leave it at an “emergency” level for any longer than necessary.

The International Monetary Fund (IMF) is urging central bankers to be more pre-emptive - lifting interest rates earlier and more vigorously to prevent dangerous excesses building up in asset and credit markets, “even if inflation appears to be largely under control”.

An IMF analysis released in Washington says asset price busts were often foreshadowed by rapidly expanding credit, deteriorating current account balances and large shifts into residential investment.

“With inflation typically under control, central banks effectively accommodated these growing imbalances, raising the risk of damaging busts,” it said.
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Australia is in better shape than the rest of the world one year on from the collapse of Lehman Brothers, but rising unemployment remains a threat, Treasurer Wayne Swan has warned.

The demise of the US investment bank was the breaking point of a growing global financial crisis that triggered a $US30 trillion ($A35 trillion) slump in global share prices and caused debt markets to freeze.

So far some 12 million people have lost their job in the resulting global recession.

New data released on Monday showed that while lending in Australia remains erratic, it is performing better than a year ago.

“Australia through a combination of circumstances, including economic stimulus and fantastic community efforts, has come through this global recession in far better shape than the rest of the world,” Mr Swan told parliament.
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Allowing the federal government to automatically adopt changes to the rules governing International Monetary Fund and World Bank members could undermine democracy in Australia, the opposition has suggested.

The lower house passed on Monday the International Monetary Agreements Amendments Bill, which slashes legislative red tape when it comes to the two global money managers.

The proposed laws mean amendments to the IMF and World Bank’s articles of agreement will be approved automatically in future, without parliament having to pass legislation, as is currently required.

Opposition treasury spokesman Joe Hockey says while the coalition supports the bill he has some serious concerns.
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The federal government has warned that the economy still faces a rough ride, even though another rise in the jobless rate was more moderate than experts had predicted.

The unemployment rate struck a six-year high of 5.8 per cent in June data released on Thursday, rising one notch from the 5.7 per cent posted in May.

This was slightly less than the 5.9 per cent predicted by economists.

Still, there was a solid 21,400 drop in the total number of people employed in the month.

The total number of jobs lost in May was also revised to 8,500, up from an originally reported 1,700.
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Federal Treasurer Wayne Swan says he’s encouraged Australia remains one of the best performing economies in the world but there’s still no room for complacency.

In his latest economic update, Mr Swan used three reports - from the World Bank, International Monetary Fund (IMF) and Organisation for Economic Co-operation and Development (OECD) - to support the strategy the Rudd government had taken to deal with the global recession.

He took particular note of an IMF statement that budget deficits were appropriate in current circumstances.

“This is a big tick for our strategy,” he said.
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The International Monetary Fund (IMF) has upgraded its economic growth forecasts for Australia, but warns that output will remain below potential for a number of years.

In a report on Australia, the IMF says the downturn has been milder than in most other countries.

“This is because of strong commodity exports, a flexible exchange rate, a healthy banking sector, and a timely and significant macro policy response,” it said.

Federal Treasurer Wayne Swan said this is “another clear endorsement” of the government’s economic strategy.

The IMF expects gross domestic product to contract by a modest 0.5 per cent in 2009, before growing 1.5 per cent in 2010.
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Financial conditions in Australia have room for improvement and the Reserve Bank of Australia (RBA) has “considerable” room to cut interest rates again, the International Monetary Fund (IMF) says.

The RBA left its cash rate unchanged at a 49-year low of 3.0 per cent on Tuesday after its monthly board meeting, saying “monetary policy has been eased significantly”.

It has cut rates by 425 basis points since September, but they remain by far the highest among the world’s advanced economies.

Outlining its reasoning for the rate decision, RBA governor Glenn Stevens said there were “signs of stabilisation” in the global economy and a pick-up in activity in China.
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Widening the scope of budget economic growth predictions is nothing more than changing the rules of the game for political purposes, the federal opposition says.

Treasurer Wayne Swan has told his state counterparts the government intends to publish an additional forecast year in the budget for 2010-11, which will show the economy growing below trend “but transitioning towards above-trend growth”.

Ordinarily, next month’s budget would publish growth forecasts for 2008-09 and 2009-10 and then assume trend growth of about three per cent for the projections for 2010-11 to 2012-13.

Opposition finance spokeswoman Helen Coonan accused the government of changing the game rules, saying it would be telling a story that the economy is in recovery.
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Treasurer Wayne Swan says Australia’s recovery will be faster than international forecasts predict.

He’s rejected suggestions by the International Monetary Fund (IMF) that recovery will be slow.

“No, absolutely not,” he told ABC Radio.

“We are in extraordinary times. We are in the middle of global recession. The forecasts do need to reflect that.”
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The federal government says it is impossible to gauge how quickly Australia will recover from recession, and can’t guarantee that the unemployment rate won’t hit double figures.

Prime Minister Kevin Rudd said further downgrades to global economic growth forecasts by the International Monetary Fund (IMF) - the fifth in six months - were an ominous sign of the severity of the global recession.

Opposition treasury spokesman Joe Hockey said the sharp downgrade to Australian growth predicted by the IMF was clear evidence that the government’s “cash splashes have spectacularly failed”.
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