September 20, 2012 / 7:11 AM / in 5 years

IMF sees Australian economy growing at potential

SYDNEY, Sept 20 (Reuters) - Australia’s outlook remains favourable and the economy should grow around 3.25 percent this year, in line with potential, thanks to still strong resource investments, the International Monetary Fund (IMF) said in a report on Thursday.

The IMF also said monetary policy should remain accommodative given the benign outlook for inflation, a strong Australian dollar and the government’s fiscal tightening efforts.

“Overall, the economy is in good shape and policies are broadly speaking appropriately set,” said Masahiko Takeda, Deputy Director, Asia and Pacific Department at the IMF.

But Takeda warned a hard landing in China, Australia’s single largest export market, was a risk, albeit a relatively low probability one.

Still, in event of any adverse shocks, the Reserve Bank of Australia and the government have the policy scope to respond, he added.

The RBA left interest rates unchanged at 3.5 percent this month, having cut twice earlier in the year. Markets are giving a better-than-evens chance of a cut next month. (Reporting by Ian Chua)

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