Australia well placed to ride financial storms

Mon, 29 Sep 08

Treasurer Wayne Swan yesterday welcomed an IMF report supporting the government view that Australia is well placed to weather the global financial crisis. The International Monetary Fund (IMF) Article IV Report on Australia concludes "that the sound macroeconomic framework should permit Australia to weather the global downturn and contain inflationary pressures." The IMF Executive Board considered that Australia's banking system remains resilient, with stable profits, high capitalisation and few non-performing loans. This was evident in stress tests undertaken by the IMF and presented in their report, which showed that Australian banks are able to absorb 'extreme' shocks. The IMF considers that the outlook for the economy is more uncertain than usual due to large countervailing forces impacting on the economy, with the commodity boom providing a substantial stimulus and the global downturn exerting a contractionary effect. IMF staff forecast that real GDP growth will moderate as required to bring underlying inflation back within the RBA's target range. The IMF also welcomes the Government's ambitious reform agenda, concluding that this agenda should enhance the flexibility of the economy and lift productivity and labour force participation.