WASHINGTON Nov 15 The International Monetary
Fund on Thursday gave a stamp of approval to Australia's
economic policies, commending the central bank's loose monetary
stance and saying there was room to ease further if needed.
In its annual review of Australia's economy, the IMF said
its directors also supported the government's budget-tightening
Achieving a budget surplus for the year to June 30, 2013 is
a key election promise of Australia's Labour government. In
October, the government announced A$16.4 billion ($17 billion)
in new savings and tax measures over four years to keep the
budget on track for a small surplus.
"(The IMF directors) welcomed the intention to maintain
budgetary surpluses over the medium term, thus strengthening
fiscal buffers against future shocks and the long-term cost of
population aging," the IMF said. "Directors noted nevertheless
that, in the event of a sharp deterioration in the economic
outlook, and hence revenue underperformance, delaying the return
to surpluses could be an option."
The IMF said the Australian dollar is still a bit above its
long-term average, hurting non-mining sectors and widening the
current account deficit. They called on the government to
continue to increase national saving, whether by reducing the
budget deficit or increasing pension contributions.
Growth in resource-rich Australia has remained well apart
from its developed peers in the euro zone and elsewhere, with
the IMF earlier predicting national income should expand 3.25
percent this year, in line with potential.
The Reserve Bank of Australia (RBA) left interest rates
unchanged at 3.25 percent last week, having cut by 150 basis
points since November last year. It left the door open to more
easing and markets are pricing in a 50-50 chance of a move in
The IMF also reviewed Australia's financial sector, finding
it "sound, resilient, and well managed." However, financial
risks remained, including from high household debt and house
prices, and reliance on offshore funding.