A big tick of approval from IMF for Australia
The International Monetary Fund (IMF) is the prestigious economic think tank funded by 189 countries to promote trade and financial stability.
It regularly provides report cards on the health of the global economy and individual countries and has been keeping a close eye on the economic fallout of the Covid-19 pandemic.
In its June 2020 report there were some pretty dire forecasts for the global economy, but some great news in its outlook for Australia. In fact, the IMF reckoned we’ll be one of the best performing economies in the world through this coronavirus recession.
The pandemic led to a worse-than-expected 4.9 percent contraction in global economic activity in 2020, which is 1.9 per cent worse than IMF’s previous forecast.
But Australia experienced a milder-than-anticipated economic contraction of 4.5 percent in 2020, which is much better than its April prediction of a 6.7 percent fall.
In fact, Australia is the only advanced economy in the world to be doing better than expected.
Let’s hope that continues.
The Reserve Bank governor agreed
Speaking at a leadership forum in June 2020, RBA Governor Philip Lowe said that Australia has “a fantastic set of underlying fundamentals.”
He also reiterated that the Reserve Bank is prepared to do “whatever it takes” to support the economy and workers.
Borrowing now, while interest rates are low, is the right thing to do in order to support future investment.
The Governor upgraded his view of the labour market with the RBA now estimating that hours worked will decline by 10 per cent, rather than the 20 per cent decline previously forecast.
On Australia’s currency he said that “at the moment, I think it’s really hard to argue that the Australian dollar is overvalued”, and when pushed on whether he was concerned about a strengthening dollar, he stated “I don’t think we’ve reached that point yet.”
He also believed that a lower currency would help to lift inflation and he challenged the Government to use this time to solve key structural issues in the economy once and for all.
“A comprehensive reform agenda by government would help the economy lift from the shadow of the virus that could have a permanent impact on the economy,” Lowe said. He emphasised that the lack of economic dynamism in Australia is a key concern and the economy needs to leverage advancements in technology.