IMF Calls Australian Economy a ‘Success Story’

By Rebecca Zhu
Rebecca Zhu
Rebecca Zhu
July 28, 2021 Updated: July 28, 2021

The International Monetary Fund Mission Chief of Australia has said the Australian economy remains a global “success story” despite the recent setbacks from widespread lockdowns.

Based in Washington D.C., Harald Finger told The Australian that he expected a contraction in the September quarter. But he believed it would be quickly followed by a “quick bounce-back” once restrictions were over.

The IMF upgraded its 2021 economic outlook for Australia from 4.5 percent growth in GDP to 5.3 percent. Its 2022 prediction was also raised from 2.8 percent to 3 percent.

The estimates were made in June prior to the lockdown measures imposed by multiple state governments, and the extent of the impact of the Greater Sydney lockdown is still unknown.

Finger warned that “the Delta variant poses additional challenges, and next year looks quite uncertain” but only expected a “moderate” downgrade to growth once the full World Economic Outlook report is released in October.

He also noted that the co-funded financial assistance in New South Wales required businesses to retain their employees during the lockdown.

“Those can be scaled up, and Australia does have substantial fiscal space so it can ramp up support,” Finger said.

The IMF is also advocating for nations to increase the country’s vaccination rates for better financial outlooks, saying vaccine access had emerged as a “principal fault-line” for the two-bloc split in the global recovery.

“[The two blocs are] those that can look forward to further normalization of activity later this year (almost all advanced economies) and those that will still face resurgent infections and rising COVID death tolls,” the IMF said. “The recovery, however, is not assured even in countries where infections are currently very low so long as the virus circulates elsewhere.”

However, despite Australia’s low vaccination rate—17 percent fully vaccinated as of Wednesday—the economy during the pandemic has been largely driven by exports. In particular, China’s insatiable appetite for our exported iron ore and other products.

According to the latest data from the Australian Bureau of Statistics (ABS), the total value of June exports was 33 percent higher compared to June 2020. The rise was led by metalliferous ore exports, mainly iron, which had grown 59 percent during that period.

The Consumer Price Index also rose in the June quarter, with new figures from the ABS showing a 0.8 percent growth led by rising fuel prices that surpassed pre-pandemic levels.

Dwelling prices also dropped by 0.1 percent due to the ongoing effect of HomeBuilder grants and other subsidies.

“Without the offset from these housing grants, new dwellings would have risen by 1.9 percent due to demand-driven increases in material and labour costs,” ABS Head of Prices Statistics Michelle Marquardt said.

The impact of the two-month Greater Sydney lockdown on the country’s economy is to be seen in the subsequent statistic releases.

Rebecca Zhu
Rebecca Zhu