This 2015 Article IV Consultation highlights that the Australia's economy is now facing a large transition as the mining investment boom winds down and the terms of trade has fallen back. Growth has been below trend for two years. Annualized GDP growth was about 2.2 percent in the first half of 2015, with particularly weak final domestic demand, and declining public and private investment. Capacity utilization and a soft labor market point to a sizeable output gap. Nominal wage growth is weak, contributing to low inflation. The FY2015/16 Budget projects a return to surplus in 2019-20.

Abstract

This 2015 Article IV Consultation highlights that the Australia's economy is now facing a large transition as the mining investment boom winds down and the terms of trade has fallen back. Growth has been below trend for two years. Annualized GDP growth was about 2.2 percent in the first half of 2015, with particularly weak final domestic demand, and declining public and private investment. Capacity utilization and a soft labor market point to a sizeable output gap. Nominal wage growth is weak, contributing to low inflation. The FY2015/16 Budget projects a return to surplus in 2019-20.

Fund Relations

(As of June 30, 2015)

Membership Status: Joined: August 5, 1947; Article VIII

General Resources Account:

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SDR Department:

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Outstanding Purchases and Loans: None

Financial Arrangements: None

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Projected Obligations to Fund 1

(SDR million; based on existing use of resources and present holdings of SDRs):

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Exchange Rate Arrangement. Australia has accepted the obligations of Article VIII, Sections 2, 3, and 4 of the Articles of Agreement, and maintains an exchange system that is free from restrictions on the making of payments and transfers for current international transactions, except for exchange restrictions that are maintained solely for the preservation of national or international security and which have been notified to the Fund pursuant to Executive Board Decision No. 144-(52/51). The exchange rate is free floating, but the Reserve Bank of Australia retains discretionary power to intervene. There are no taxes or subsidies on purchases or sales of foreign exchange.

Restrictions on Capital Transactions. Australia maintains a capital transactions regime that is virtually free of restrictions. Two main restrictions on foreigners require: authorization for significant ownership of Australian corporations; and approval for acquisition of real estate.

Article IV Consultation. Australia is on the 12-month consultation cycle. The 2015 Article IV consultation discussions were held during June 11-24, 2015; the Executive Board discussed the staff report and concluded the consultation on September 14, 2015.

FSAP Participation. The last FSAP Update involved two missions: April 23-May 15 and July 9-24, 2012; the Executive Board discussed the assessment (IMF Country Report No. 12/308) on November 12, 2012.

Fourth Amendment. Australia has accepted the Fourth Amendment to the Articles of Agreement.

Statistical Issues

Data provision is adequate for surveillance. Australia has subscribed to the Special Data Dissemination Standard (SDDS) since April 1996, and its metadata are posted on the Fund’s Dissemination Standards Bulletin Board (DSBB). Australia also participates in the G-20 Data Gaps Initiative and has implemented all the recommendations of the first phase of the DGI, with the exception of semi-annual Coordinated Portfolio Investment Survey (CPIS) data. Australia has no plans to adhere to the SDDS Plus. In recent years, the Australian Bureau of Statistics (ABS) has taken several initiatives to further improve the quality of the data, such as issues relating to seasonal adjustment of unemployment and employment statistics. Adding monthly inflation data to the suite of statistics would assist surveillance.

Table of Common Indicators Required for Surveillance

(As of July 31, 2015)

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Any reserve assets that are pledged or otherwise encumbered should be specified separately. Also, data should comprise short-term liabilities linked to a foreign currency but settled by other means as well as the notional values of financial derivatives to pay and to receive foreign currency, including those linked to a foreign currency but settled by other means.

Both market-based and officially determined, including discount rates, money market rates, rates on treasury bills, notes, and bonds.

Foreign, domestic bank, and domestic nonbank financing.

Consists of the central government (including budgetary, extra budgetary, and social security funds) and state and local government

Including currency and maturity composition.

Includes external gross financial asset and liability positions vis-à-vis nonresidents.

Daily (D), Weekly (W), Monthly (M), Quarterly (Q), Annually (A), Irregular (I); Not Available (NA).

1

When a member has overdue financial obligations outstanding for more than three months, the amount of such arrears will be shown in this section.