{
  "title": "IMF Executive Board Concludes 2016 Article IV Consultation with Australia",
  "publication": "IMF News, February 9, 2017",
  "sourceUrl": "https://www.imf.org/en/news/articles/2017/02/09/pr1741-australia-imf-executive-board-concludes-2016-article-iv-consultation",
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  "summary": "Australia has enjoyed \"robust growth\" despite the commodity price and mining investment bust since 2011; resilience of the economy and strong policy frameworks noted.",
  "publishDate": "2017-02-09",
  "sections": [
    {
      "heading": "Economic performance and outlook",
      "content": "- Australia has enjoyed \"robust growth\" despite the commodity price and mining investment bust since 2011; resilience of the economy and strong policy frameworks noted.\n- From mid-2015, the recovery advanced with a \"marked pickup in activity,\" although underlying demand growth remained close to trend.\n- Weaknesses noted: wage and price pressures have been weak, underemployment has risen, and private business investment outside mining has been lackluster.\n- Real GDP (annual percent change, selected years/projections): 2012: 3.6; 2013: 2.1; 2014: 2.8; 2015: 2.4; 2016: 2.3; 2017: 2.6; 2018: 3.0; 2019: 2.9.\n- Domestic demand and components (annual percent change, partial series): Domestic demand 2012: 4.2; 2013: 0.7; 2014: 1.2; 2015: 1.3; 2016: 1.5. Private consumption 2012: 1.7; 2013: 2.7. Public consumption 2012: 2.5; 2013: 1.1; 2014: 1.0; 2015: 3.4; 2016: 3.8; 2017: 1.6; 2018: 1.8.\n- Investment (annual percent change, partial series): 2012: 9.1; 2013: -1.5; 2014: -1.7; 2015: -3.2; 2016: -2.8; 2017: 3.5; 2018: 3.3; 2019: 3.1.\n- Investment (percent of GDP, selected years/projections): 2012: 29.0; 2013: 27.6; 2014: 26.9; 2015: 26.3; 2016: 25.1; 2017: 25.4; 2018: 25.5; 2019: 25.6.\n- Non-mining investment (percent of GDP, series): 2012: 14.9; 2013: 14.5; 2014: 15.2; 2015: 16.4; 2016: 16.3; 2017: 17.3; 2018: 18.4; 2019: 18.6; 2020: 18.8; 2021: 18.9; 2022: 19.0."
    },
    {
      "heading": "Monetary policy, inflation, and labor market",
      "content": "- With inflation below the 2-3 percent target range and a downshift in inflation expectations in 2016, the Reserve Bank of Australia (RBA) lowered its policy rate by another 50 basis points to 1.5 percent.\n- Core inflation stabilized at around 1.6 percent after the easing.\n- Wage growth has remained weak; nominal unit labor costs running at less than 0.5 percent on average.\n- Some economic slack remains: output gap (percent of potential) series: 2012: -0.5; 2013: -1.1; 2014: -1.3; 2015: -1.4; 2016: -1.0; 2017: -0.7; 2018: -0.4.\n- Labor market indicators (partial): Unemployment (percent of labor force): 2012: 5.2; 2013: 5.7; 2014: 6.1; 2015: 5.6; 2016: 5.4; 2017: 5.1. Employment growth (annual percent change): 2012: 0.9; 2013: 1.9.\n- Directors agreed monetary policy stance should remain accommodative given inflation below target, elevated underemployment, and remaining slack; authorities were welcomed for readiness to ease further if warranted and encouraged to improve policy communication."
    },
    {
      "heading": "Housing market and macro‑financial vulnerabilities",
      "content": "- House prices and household debt have risen further in a continued low interest rate environment, but house price growth has moderated recently.\n- By some metrics, housing market conditions have cooled, concurrent with intensified prudential and regulatory steps.\n- Intrinsic housing market risks are described as localized.\n- Bank lending to households has slowed, especially in riskier loans, and banks have strengthened their balance sheets.\n- Macro-financial indicators (selected): House price index series: 2012: 113; 2013: 120; 2014: 131; 2015: 138; 2016: 145; 2017: 152; 2018: 158; 2019: 164; 2020: 169; 2021: 174. House price-to-income, capital cities (2012): 3.9. Household debt (percent of disposable income, series): 2012: 166; 2013: 171; 2014: 176; 2015: 183; 2016: 185; 2017: 186; 2018: 187; 2019: 184; 2020: 183.1; 2021: 181.8.\n- Directors commended prudential and regulatory measures to mitigate housing risks, encouraged vigilance, and called for continued enhancement of banking system resilience, including encouraging banks to strengthen capital positions.\n- Financial authorities should be ready to intensify targeted prudential measures if lending or house price growth re-accelerates, while advancing regulatory reform implementation."
    },
    {
      "heading": "Fiscal policy and public finances",
      "content": "- The federal government aimed for substantial near-term fiscal consolidation but budget targets have not been met because of weaker nominal income.\n- FY2016/17 budget projects a return to fiscal balance by FY2020/21.\n- The government renewed commitment to a federal government surplus of 1 percent of GDP over the business cycle as a medium-term fiscal anchor, implying a cumulative adjustment of up to 3.4 percent of GDP.\n- The Mid-Year Economic and Fiscal Outlook 2016-17 (MYEFO) foresees a cumulative adjustment of the fiscal balance of 2.1 percent of GDP by end of FY2019/20, primarily related to stronger personal income tax collection due to bracket creep.\n- General government (percent of GDP, selected series): Revenue 2012: 33.3; 2013: 33.9; 2014: 34.1; 2015: 34.6; 2016: 34.9; 2017: 35.2; 2018: 35.5; 2019: 35.6; 2020: 35.7. Expenditure 2012: 36.7; 2013: 37.0; 2014: 37.3; 2015: 37.4; 2016: 37.1; 2017: 36.5; 2018: 35.9; 2019: 35.4. Net lending/borrowing 2012: -3.5; 2013: -2.9; 2014: -2.7; 2015: -2.5; 2016: -1.6; 2017: 0.3. Gross debt (percent of GDP) series: 2012: 27.8; 2013: 30.7; 2014: 34.2; 2015: 37.6; 2016: 41.3; 2017: 43.6; 2018: 43.8; 2019: 42.8; 2020: 41.0; 2021: 39.2; 2022: 37.2."
    },
    {
      "heading": "Structural reforms and policy priorities",
      "content": "- Recent structural reforms focus on fostering innovation.\n- The National Innovation and Science Agenda (NISA) includes measures to boost innovation and entrepreneurship in the high-tech sector, including through tax breaks.\n- Legislation is being prepared for key components of the Harper Review to boost competition and productivity in services sectors and strengthen competition policy broadly.\n- Directors welcomed the government’s structural reform agenda to boost productivity through fostering innovation and strengthening competition, especially in the services sector.\n- Directors commended authorities for commitment to an open economy in trade, foreign investment, and immigration."
    },
    {
      "heading": "Executive Board assessment and policy recommendations",
      "content": "- Executive Directors noted robust growth and low unemployment during the current terms-of-trade adjustment and emphasized resilience and strong policy frameworks.\n- Balance of risks to the growth outlook has improved, but significant risks remain: weaker-than-expected domestic consumption, housing-related vulnerabilities, rise in protectionist policies globally, and a significant slowdown in Australia’s main trading partners.\n- Key policy recommendations by Directors:\n  - Maintain supportive macroeconomic policies to ensure a smooth transition to non-mining growth.\n  - Keep monetary policy accommodative while inflation remains below target, underemployment is elevated, and slack exists; be ready to ease further if warranted and improve policy communication.\n  - Use available fiscal space to support aggregate demand and structural fiscal reforms, and increase infrastructure investment (noting some Directors saw scope to use space while many others viewed front-loaded consolidation as appropriately prudent).\n  - Continue considering options to strengthen the medium-term fiscal framework and adopt contingency plans to respond to large downside risks.\n  - Continue enhancing prudential and regulatory measures to mitigate housing market risks and improve AML/CFT safeguards in the real estate sector.\n  - Encourage banks to strengthen capital positions and financial regulators to stand ready to intensify targeted prudential measures if lending or house price growth re-accelerates.\n  - Advance the regulatory reform agenda and structural reforms to boost productivity and competition."
    },
    {
      "heading": "Key macroeconomic and financial indicators (selected exact figures)",
      "content": "- Terms of trade index (goods, avg): 2012: 121; 2013: 117; 2014: 107; 2015: 94; 2016: 92; 2017: 91; 2018: 86; 2019: 85.\n- Iron ore prices (index): 2012: 101; 2013: 77; 2014: 44; 2015: 46; 2016: 55; 2017: 45; 2018: 39.\n- Consumer prices (avg): GDP deflator (avg) series includes 0.2 and -0.6 entries.\n- Reserve Bank of Australia cash rate (percent, avg) and other interest series included in the dataset (series entries such as 7.0; 6.2; 6.0; 6.3; 6.6 appear in the financial table).\n- Credit to the private sector (annual percent change, partial): 7.4; 6.5; 5.0; 4.1.\n- Net international investment position, gross official reserves, nominal GDP (bn A$) and other memorandum items recorded in the dataset (examples: gross official reserves entries 47; 59; 66; 67; …; nominal GDP (bn A$) series: 1,507; 1,559; 1,606; 1,634; 1,688; 1,766; 1,851; 1,948; 2,052; 2,162; 2,281).\n- Population (million) series: 2012: 22.9; 2013: 23.6; 2014: 24.3; 2015: 25.0; 2016: 25.3; 2017: 25.7; 2018: 26.1; 2019: 26.4.\n- Sources for the indicator table: Authorities' data; IMF World Economic Outlook database; and IMF staff estimates and projections.\n\nIMF Communications Department — Press Release No. 17/41 (February 9, 2017).\n\n---\n\n\n References\n\n- Australia and the IMF\n- IMF Policy Advice -- A Factsheet\n- Press Releases\n- PRESS CENTER\n- http://www.imf.org/external/np/sec/misc/qualifiers.htm\n- https://www.imf.org/en/home\n\nSource: https://www.imf.org/en/news/articles/2017/02/09/pr1741-australia-imf-executive-board-concludes-2016-article-iv-consultation"
    }
  ],
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    "Published: February 9, 2017",
    "Australia has enjoyed \"robust growth\" despite the commodity price and mining investment bust since 2011; resilience of the economy and strong policy frameworks noted.",
    "From mid-2015, the recovery advanced with a \"marked pickup in activity,\" although underlying demand growth remained close to trend.",
    "Weaknesses noted: wage and price pressures have been weak, underemployment has risen, and private business investment outside mining has been lackluster.",
    "Real GDP (annual percent change, selected years/projections): 2012: 3.6; 2013: 2.1; 2014: 2.8; 2015: 2.4; 2016: 2.3; 2017: 2.6; 2018: 3.0; 2019: 2.9.",
    "Domestic demand and components (annual percent change, partial series): Domestic demand 2012: 4.2; 2013: 0.7; 2014: 1.2; 2015: 1.3; 2016: 1.5. Private consumption 2012: 1.7; 2013: 2.7. Public consumption 2012: 2.5; 2013: 1.1; 2014: 1.0; 2015: 3.4; 2016: 3.8; 2017: 1.6; 2018: 1.8.",
    "Investment (annual percent change, partial series): 2012: 9.1; 2013: -1.5; 2014: -1.7; 2015: -3.2; 2016: -2.8; 2017: 3.5; 2018: 3.3; 2019: 3.1.",
    "Investment (percent of GDP, selected years/projections): 2012: 29.0; 2013: 27.6; 2014: 26.9; 2015: 26.3; 2016: 25.1; 2017: 25.4; 2018: 25.5; 2019: 25.6.",
    "Non-mining investment (percent of GDP, series): 2012: 14.9; 2013: 14.5; 2014: 15.2; 2015: 16.4; 2016: 16.3; 2017: 17.3; 2018: 18.4; 2019: 18.6; 2020: 18.8; 2021: 18.9; 2022: 19.0.",
    "With inflation below the 2-3 percent target range and a downshift in inflation expectations in 2016, the Reserve Bank of Australia (RBA) lowered its policy rate by another 50 basis points to 1.5 percent.",
    "Core inflation stabilized at around 1.6 percent after the easing.",
    "Wage growth has remained weak; nominal unit labor costs running at less than 0.5 percent on average.",
    "Some economic slack remains: output gap (percent of potential) series: 2012: -0.5; 2013: -1.1; 2014: -1.3; 2015: -1.4; 2016: -1.0; 2017: -0.7; 2018: -0.4.",
    "Labor market indicators (partial): Unemployment (percent of labor force): 2012: 5.2; 2013: 5.7; 2014: 6.1; 2015: 5.6; 2016: 5.4; 2017: 5.1. Employment growth (annual percent change): 2012: 0.9; 2013: 1.9.",
    "Directors agreed monetary policy stance should remain accommodative given inflation below target, elevated underemployment, and remaining slack; authorities were welcomed for readiness to ease further if warranted and encouraged to improve policy communication.",
    "House prices and household debt have risen further in a continued low interest rate environment, but house price growth has moderated recently.",
    "By some metrics, housing market conditions have cooled, concurrent with intensified prudential and regulatory steps.",
    "Intrinsic housing market risks are described as localized.",
    "Bank lending to households has slowed, especially in riskier loans, and banks have strengthened their balance sheets.",
    "Macro-financial indicators (selected): House price index series: 2012: 113; 2013: 120; 2014: 131; 2015: 138; 2016: 145; 2017: 152; 2018: 158; 2019: 164; 2020: 169; 2021: 174. House price-to-income, capital cities (2012): 3.9. Household debt (percent of disposable income, series): 2012: 166; 2013: 171; 2014: 176; 2015: 183; 2016: 185; 2017: 186; 2018: 187; 2019: 184; 2020: 183.1; 2021: 181.8.",
    "Directors commended prudential and regulatory measures to mitigate housing risks, encouraged vigilance, and called for continued enhancement of banking system resilience, including encouraging banks to strengthen capital positions.",
    "Financial authorities should be ready to intensify targeted prudential measures if lending or house price growth re-accelerates, while advancing regulatory reform implementation.",
    "The federal government aimed for substantial near-term fiscal consolidation but budget targets have not been met because of weaker nominal income.",
    "FY2016/17 budget projects a return to fiscal balance by FY2020/21.",
    "The government renewed commitment to a federal government surplus of 1 percent of GDP over the business cycle as a medium-term fiscal anchor, implying a cumulative adjustment of up to 3.4 percent of GDP.",
    "The Mid-Year Economic and Fiscal Outlook 2016-17 (MYEFO) foresees a cumulative adjustment of the fiscal balance of 2.1 percent of GDP by end of FY2019/20, primarily related to stronger personal income tax collection due to bracket creep.",
    "General government (percent of GDP, selected series): Revenue 2012: 33.3; 2013: 33.9; 2014: 34.1; 2015: 34.6; 2016: 34.9; 2017: 35.2; 2018: 35.5; 2019: 35.6; 2020: 35.7. Expenditure 2012: 36.7; 2013: 37.0; 2014: 37.3; 2015: 37.4; 2016: 37.1; 2017: 36.5; 2018: 35.9; 2019: 35.4. Net lending/borrowing 2012: -3.5; 2013: -2.9; 2014: -2.7; 2015: -2.5; 2016: -1.6; 2017: 0.3. Gross debt (percent of GDP) series: 2012: 27.8; 2013: 30.7; 2014: 34.2; 2015: 37.6; 2016: 41.3; 2017: 43.6; 2018: 43.8; 2019: 42.8; 2020: 41.0; 2021: 39.2; 2022: 37.2.",
    "Recent structural reforms focus on fostering innovation.",
    "The National Innovation and Science Agenda (NISA) includes measures to boost innovation and entrepreneurship in the high-tech sector, including through tax breaks.",
    "Legislation is being prepared for key components of the Harper Review to boost competition and productivity in services sectors and strengthen competition policy broadly.",
    "Directors welcomed the government’s structural reform agenda to boost productivity through fostering innovation and strengthening competition, especially in the services sector.",
    "Directors commended authorities for commitment to an open economy in trade, foreign investment, and immigration.",
    "Executive Directors noted robust growth and low unemployment during the current terms-of-trade adjustment and emphasized resilience and strong policy frameworks.",
    "Balance of risks to the growth outlook has improved, but significant risks remain: weaker-than-expected domestic consumption, housing-related vulnerabilities, rise in protectionist policies globally, and a significant slowdown in Australia’s main trading partners.",
    "Key policy recommendations by Directors:",
    "Terms of trade index (goods, avg): 2012: 121; 2013: 117; 2014: 107; 2015: 94; 2016: 92; 2017: 91; 2018: 86; 2019: 85.",
    "Iron ore prices (index): 2012: 101; 2013: 77; 2014: 44; 2015: 46; 2016: 55; 2017: 45; 2018: 39.",
    "Consumer prices (avg): GDP deflator (avg) series includes 0.2 and -0.6 entries.",
    "Reserve Bank of Australia cash rate (percent, avg) and other interest series included in the dataset (series entries such as 7.0; 6.2; 6.0; 6.3; 6.6 appear in the financial table).",
    "Credit to the private sector (annual percent change, partial): 7.4; 6.5; 5.0; 4.1.",
    "Net international investment position, gross official reserves, nominal GDP (bn A$) and other memorandum items recorded in the dataset (examples: gross official reserves entries 47; 59; 66; 67; …; nominal GDP (bn A$) series: 1,507; 1,559; 1,606; 1,634; 1,688; 1,766; 1,851; 1,948; 2,052; 2,162; 2,281).",
    "Population (million) series: 2012: 22.9; 2013: 23.6; 2014: 24.3; 2015: 25.0; 2016: 25.3; 2017: 25.7; 2018: 26.1; 2019: 26.4.",
    "Sources for the indicator table: Authorities' data; IMF World Economic Outlook database; and IMF staff estimates and projections.",
    "[Australia and the IMF](http://www.imf.org/external/country/AUS/index.htm)",
    "[IMF Policy Advice -- A Factsheet](https://www.imf.org/en/about/factsheets/imf-surveillance)",
    "[Press Releases](https://www.imf.org/en/news/searchnews)",
    "[PRESS CENTER](http://presscenter.imf.org/)",
    "[http://www.imf.org/external/np/sec/misc/qualifiers.htm](http://www.imf.org/external/np/sec/misc/qualifiers.htm)",
    "[https://www.imf.org/en/home](https://www.imf.org/en/home)"
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