Treasurer Wayne Swan (Brendon Thorne/Getty Images)
The IMF said on Thursday that policymakers need to manage a balancing act between providing support until the recovery is sufficiently robust while ensuring this does not ignite inflationary pressures or concerns over fiscal sustainability.
Treasurer Wayne Swan told federal parliament that he has no intention of winding back infrastructure spending, with a report by independent forecaster Access Economics highlighting the need for such initiatives.
Access, in its latest Investment Monitor released on Thursday, said a sharp rebound in business confidence had yet to translate into an overall boost for investment projects.
A record low of just nine new investment projects was recorded in the September quarter - continuing a declining trend since mid-2008.
"This report underscores just how vital it is that the government maintain stimulus investment in infrastructure," Mr Swan said.
"It is absolutely critical in terms of jobs now, absolutely critical for small business and absolutely critical to fill the gap which has been left by absence of private demand."
The IMF, in its latest Regional Economic Outlook for Asia and the Pacific, is sticking with its forecasts for Australia made earlier in the month, expecting gross domestic product growth of 0.7 per cent this year and 2.0 per cent next year.
"Australia is avoiding a contraction in 2009, thanks to its timely and forceful policy response and strong commodity exports, especially to China," the global institution said in releasing its report in Seoul.
Mr Swan also picked up on comments made by opposition finance spokeswoman Senator Helen Coonan that the Reserve Bank of Australia (RBA) would look closely at raising the cash rate by 50 basis points at its Melbourne Cup day board meeting.
"I think it is pretty clear that the Liberal party has already put the champagne on ice, not for cup day, but in the hope that rates go up by 50 basis points," Mr Swan said.
"Shame on them."
The opposition thought a rate rise would be to its political advantage while maintaining the "ridiculous position" that interest rates could stay forever at a 50-year low, he said.
Money markets are fully priced for a 25 basis point increase that would lift the cash rate to 3.5 per cent from 3.25 per cent.
There was also disappointing news for ANZ Bank's 800,000 customers.
ANZ chief executive Mike Smith can't guarantee future lending rate increases won't exceed official moves, and says media reports to the contrary this week are incorrect.
"I said I would be reluctant to move (rates) beyond a (RBA) rate increase," Mr Smith told analysts after the bank posted an 11 per cent fall in annual net profit to $2.943 billion.
"I wouldn't say I wouldn't do it."
While a worry for existing borrowers, new data suggested a potential lack of housing stock for those wanting to buy.
New home sales fell by 4.5 per cent in September, just one month after posting their largest monthly increase in more than three years, the Housing Industry Association (HIA) said.
HIA chief economist Harley Dale said demand was weakening after a reduction in the government's first home owners' grant and sales pointed to a shallow recovery in residential building.
"Indeed, there is a very real risk that costly delays in planning approvals and land shortages will combine to blunt the housing recovery, reversing the recent gains in housing affordability," he said.
