Our Treasurer is in for an interesting round of meetingsThe IMF has declared the global recession over saying Australia has the best prospects in the developed world.
The extraordinary endorsement in the Fund's World Economic Outlook released overnight in Washington sets up Treasurer Wayne Swan for something of a hero's welcome as he attends back-to-back meetings of the Fund, the World Bank and Group of 20 leading industrial nations from Thursday.
For the first time the Fund predicts a return to relatively normal worldwide growth this year of 4.25 per cent, up from 3.25 per cent in its previous forecasts released in October.
It says last year the global economy shrank 0.5 per cent.
The International Monetary Fund singles out Australia as the developed nation furthest ahead of the pack saying "Australia and the newly industrialized Asian economies are off to a strong start and will likely stay in the lead"...
Australia's economy is slated to grow by 3.0 and 3.5 per cent this year and the next, well ahead of the US at 3.1 and 2.6, the UK at 1.3 and 2.5 and Japan on 1.9 and 2.0 per cent. Mainland Europe will grow at just 1.0 and 1.5 per cent.
Australia's unemployment rate is set to fall towards 5 per cent in 2011, way below the 8 per cent expected in the US and the UK and the 10 per cent expected in mainland Europe.
Prepared after consultation with the Australian Treasury the forecasts suggest the government will sharply revise up its growth forecasts in next month's Budget.
En route to the United States Mr Swan said the report was "a testament to the success of economic stimulus together with the resilience of the Australian people."
"Our stimulus is already being withdrawn as our economy strengthens. The withdrawal is expected to detract around one percentage point from growth this year. This means fiscal stimulus in Australia is being withdrawn faster than in most other advanced economies, and ahead of the timetable set by the Fund for other developed economies."
The IMF says Australia's growth will be led by domestic spending, "both public and private" this year with the pickup in commodity prices expected to boost investment in the resource sector.
A second unpublished IMF report leaked to the BBC recommends G20 leaders impose new taxes on banks and other financial institutions in order to fund future bailouts.
It says Australia alone among the major advanced economies paid its financial institutions nothing directly, but supported them with guarantees it assesses as being worth around $150 billion.
It recommends that each of the G20 nations charge their institutions a "financial stability contribution," initially set at a flat rate but later varied in accordance with risk in order to pay for the "fiscal cost of any future government support to the sector".
A second "financial activities tax" would be levied on the total of the financial institutions' profits and the remuneration they pay their staff, including bonuses.
The recommendations would hit Australian banks hard as they are among a small number reporting big profits.
It will be discussed at Thursday's G20 Finance Ministers meeting ahead of formal consideration at the G20 leaders meeting in June.
Published in today's SMH and Age
Leaked IMF Report
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