## IMF Executive Board Concludes 2019 Article IV Consultation with Australia

_IMF News, March 4, 2020_

## Source details

**Canonical URL:** [IMF Executive Board Concludes 2019 Article IV Consultation with Australia](https://www.imf.org/en/news/articles/2020/03/04/pr2079-australia-imf-executive-board-concludes-2019-article-iv-consultation)

## Other formats

- [Markdown version](/en/news/articles/2020/03/04/pr2079-australia-imf-executive-board-concludes-2019-article-iv-consultation/index.md)
- [Structured JSON version](/en/news/articles/2020/03/04/pr2079-australia-imf-executive-board-concludes-2019-article-iv-consultation/index.json)
- [Bundle manifest](/en/news/articles/2020/03/04/pr2079-australia-imf-executive-board-concludes-2019-article-iv-consultation/bundle-manifest.json)

## Bibliographic details
- Published: March 4, 2020

---

### Economic overview and near-term outlook
- Economic growth recovered gradually in 2019 from the lows in the second half of 2018, supported by accommodative fiscal and monetary policies.
- Real GDP growth: 1.8 (2019); projections: 2.0 (2020), 2.4 (2021), 2.6 (2022).
- Net exports contributed to growth in 2019 as Australia largely avoided global trade disruptions.
- Headline and underlying inflation dipped below the Reserve Bank of Australia (RBA)’s target range of 2-3 percent.
- Housing prices experienced a renewed pickup following a marked price correction during 2017-19.

### Labor market and inflation
- Employment grew significantly in 2019, but relatively high unemployment and underemployment rates suggest persistent labor market slack.
- Unemployment (percent of labor force): 6.1 (2015), 5.7 (2016), 5.6 (2017), 5.3 (2018).
- Wages (nominal percent change): 1.9 (2018), 3.3 (2019).

### Financial sector health and vulnerabilities
- Australian banks have remained adequately capitalized and profitable.
- Underlying vulnerabilities include continued reliance on offshore wholesale funding and considerable loan concentration in residential mortgages.
- The capital framework for banks has been further strengthened with a higher capital requirement for domestic systemically important banks from 2024.
- Directors recommended priorities including:
  - Encouraging a further lengthening of the maturity of banks’ wholesale funding.
  - Implementing the APRA Capability Review’s recommendations.
  - Reinforcing financial crisis management arrangements as highlighted in the 2018 FSAP.
  - Strengthening the AML/CFT regime.
  - Implementing Hayne Royal Commission recommendations and enhancing banks’ loss-absorbing capacity.

### Fiscal and monetary policy guidance
- Directors commended sound macroeconomic management and strong policy frameworks underpinning resilience.
- Near-term macroeconomic policy mix should remain accommodative.
- Directors welcomed the expansionary fiscal policy stance in FY2019/20, driven by tax cuts and additional infrastructure spending.
- Given Australia’s output gap and substantial fiscal space, Directors generally recommended avoiding a contractionary fiscal stance expected in FY2020/21, including by maintaining state-level infrastructure spending at current levels; some Directors emphasized preserving fiscal buffers against potential downside risks.
- Directors supported the current monetary policy stance and highlighted that maintaining data-dependent accommodative monetary policy will help support the recovery of domestic demand.
- Should downside risks materialize, Directors agreed authorities should be ready for a coordinated response, including fiscal stimulus jointly with both conventional and unconventional monetary policy measures.

### Structural policies and housing
- Directors underscored that housing supply reforms remain critical for restoring affordability; recommended reforms include more efficient long-term planning, zoning, and local government reform, and a focus on infrastructure development.
- Directors encouraged stepped-up structural reforms to support strong and inclusive growth, including:
  - Strengthening business investment.
  - Supporting SMEs’ access to finance.
  - Pursuing product market deregulation.
  - Introducing well-targeted tax incentives.
  - Further increasing infrastructure spending while focusing on investment quality.
  - Promoting innovation, increasing full-time female employment, and reducing youth underemployment.
- Directors encouraged development of an ambitious, national, integrated approach to energy policy and climate change to reduce policy uncertainty and catalyze business investment.

### Risks to the outlook
- Risks are tilted to the downside and had recently increased amid the coronavirus outbreak.
- External risks: possible re-escalation of U.S./China trade tensions; sharp tightening of global financial conditions; near-term risks related to the recent coronavirus outbreak.
- Domestic risks: further weakening of private consumption if cooling labor markets squeeze household income; adverse weather conditions, including a worsening of the bushfires, affecting consumption, tourism, and agriculture.
- Upside/alternative domestic scenario: looser financial conditions could re-accelerate house price inflation, boosting private consumption but adding to medium-term vulnerabilities given high household debt levels.

### Selected key indicators (exact values from Table 1)
- Investment (percent of GDP) 1/: 25.9 (2015), 24.6 (2016), 24.2 (2017), 22.5 (2018), 22.3 (2019), 22.4 (2020), 22.7 (2021), 22.8 (2022).
- Private investment (percent of GDP): 21.4 (2015), 19.7 (2016), 19.1 (2017), 19.0 (2018), 17.7 (2019), 17.3 (2020), 17.4 (2021), 17.6 (2022), 17.8 (2023), 17.9 (2024), 18.0 (2025).
- House price index: 131 (2015), 141 (2016), 148 (2017), 140 (2018), 144 (2019), 149 (2020), 154 (2021), 159 (2022), 163 (2023), 168 (2024), 173 (2025).
- Household debt (percent of disposable income) 2/: 180 (2015), 187 (2016), 185 (2017), 183 (2018), 181 (2019), 178 (2020), 175 (2021), 172 (2022), 170 (2023).
- Gross debt (percent of GDP): 39.5 (2015), 41.0 (2016), 41.2 (2017), 41.7 (2018), 43.0 (2019), 42.7 (2020), 40.2 (2021), 38.7 (2022).
- Nominal GDP (bn A$): 1,641 (2015), 1,703 (2016), 1,808 (2017), 1,899 (2018), 1,995 (2019), 2,060 (2020), 2,127 (2021), 2,209 (2022), 2,314 (2023), 2,427 (2024), 2,547 (2025).
- Population (million): 24.0 (2015), 24.4 (2016), 24.8 (2017), 25.2 (2018), 25.6 (2019), 26.0 (2020), 26.4 (2021), 26.8 (2022), 27.2 (2023), 27.6 (2024), 28.0 (2025).

*Source: IMF Executive Board Concludes 2019 Article IV Consultation with Australia, March 4, 2020.*

---


## References

- [https://www.imf.org/-/media/images/imf/bios/imfboard.jpg](https://www.imf.org/-/media/images/imf/bios/imfboard.jpg)
- [The Executive Board](https://www.imf.org/external/np/sec/memdir/eds.aspx)
- [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)

_Source: https://www.imf.org/en/news/articles/2020/03/04/pr2079-australia-imf-executive-board-concludes-2019-article-iv-consultation_