The International Monetary Fund’s upgrade of the Australian economic outlook confirms the nation has outperformed all major advanced economies over the past year, the federal treasurer, Josh Frydenberg, has said.
The IMF is expecting the economy to grow by 4.5% this year and 2.8% in 2022. In January, the Washington-based institution expected the economy to grow by 3.5% in 2021.
“What this report confirms is that we’ve outperformed all major advanced economies over the past year,” Frydenberg said on Wednesday. “There’s still a long way to go but Australians can see the light at the end of the tunnel.”
In its latest outlook, the IMF is also projecting a stronger recovery for the global economy in 2021 and 2022, compared to its previous predictions made in January.
The world economy is expected to grow by 6.0% in 2021 and 4.4% in 2022, compared with 5.5% and 4.2% respectively previously.
But the fund warns a high degree of uncertainty surrounds these projections, with many possible downside and upside risks.
“Much still depends on the race between the virus and vaccines,” it says. “Greater progress with vaccinations can uplift the forecast, while new virus variants that evade vaccines can lead to a sharp downgrade.”
Despite the reserve bank’s efforts to fuel the economy through record low interest rates, the IMF expects Australian inflation to be still below the central bank’s 2-3% target band at the end of next year.
It forecasts the rate of inflation to be 1.7% this year and 1.6% in 2022.
The Reserve Bank governor, Philip Lowe, reiterated on Tuesday he did not expect to lift the cash rate from its record low 0.1% until 2024 when he anticipates inflation will be comfortably in the target band.
The IMF also does not expect Australia’s unemployment rate to be comfortably below 6% until next year, forecasting a rate of 5.5% in 2022.
The jobless rate did unexpectedly dip to 5.8% in February, but there is now uncertainty about the employment outlook after the government’s jobkeeper wage subsidy program came to an end last month.
New IMF forecasts for Australia
Economy to grow faster than earlier expected: 4.5% in 2021 and 2.8% in 2022
Unemployment to decline: 6% average in 2021 and 5.5% in 2022
Inflation to remain subdued: 1.7% in 2021 and 1.6% in 2022