The IMF says Australia's economy will grow 3% this year and keep rising

Chardonnay vines on a vineyard at Cowra in the central west of New South Wales. Greg Wood/AFP/Getty Images
  • The IMF forecasts GDP in Australia at 3.1% next year, well above recent estimates.
  • Global growth is on track to reach 3.9% this year and next.
  • However, the first shots in a potential trade war have been fired.

Australia’s economy is heading upwards as long the rise isn’t interrupted by a global trade war.

The International Monetary Fund (IMF) has upgraded its forecasts for economic growth in Australia to 3% this year, a sharp rise from 2.3% in 2017, and up from the 2.9% rate predicted in February.

The numbers are in line with the federal government’s mid year budget update with GDP forecast to grow by 2.5% in 2017-18 and 3% in 2018-19 after growth of 2% in 2016-17.

And next year Australia’s GPD will rise again to 3.1%, according to the IMF’s latest World Economic Outlook.

And the consumer price index is expected to jump to 2.2% from around 2%, and then to 2.4% in 2019. Inflation is currently running at 1.9%.

Here are the numbers for Australia and the region:

Source: IMF

The IMF says the global economic upswing that began around mid-2016 has become broader and stronger.

“Global growth seems on track to reach 3.9% this year and next, substantially above our October forecast,” says the IMF.

However, one risk is an escalating trade war, a reference to the Trump administration returning the US to tariffs to protect domestic industry.

“The first shots in a potential trade war have now been fired,” says the IMF.

“Conflict could intensify if fiscal policies in the United States drive its trade deficit higher without action in Europe and Asia to reduce surpluses.

“The multilateral rules-based trade system that evolved after World War II and that nurtured unprecedented growth in the world economy needs strengthening. Instead, it is in danger of being torn apart.”

The latest World Economic Outlook report projects that advanced economies will continue to expand above their potential growth rates this year and next before decelerating.

Growth in emerging markets and developing economies will rise before leveling off.

“For most countries, current favourable growth rates will not last,” says the IMF.

“Policymakers should seize this opportunity to bolster growth, make it more durable, and equip their governments better to counter the next downturn.”

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