IMF downgrades Australia’s economic growth forecasts, citing ‘synchronised global slowdown’

The International Monetary Fund (IMF) has slashed Australia’s economic growth forecast by 0.4% to 1.7% in 2019, warning of a ‘synchronised global slowdown’ comparable to the 2008-09 global financial crisis.

The latest IMF World Economic Outlook report predicted that growth in Australia would recover to 2.3% in 2020, although this was 0.5% lower than its previous assessment.

The US-based institution also downgraded its global growth forecast by 0.3% to 3% for 2019, citing rising geopolitical turmoil, the US-China trade war and stalling global economic growth.

The IMF cautioned that low inflation could become entrenched in advanced economies, ‘constraining’ interest rate policy and ‘limiting its effectiveness’. This warning followed the Reserve Bank of Australia’s admission on Tuesday that record low interest rates might not be working as well as hoped.

Prime Minister Scott Morrison declared his budget surplus plan will not be ‘spooked’ by international events, despite the IMF calling on governments to use budget spending and structural reforms to lift economic growth.

“Monetary policy cannot be the only game in town. It should be coupled with fiscal support where fiscal space is available, and policy is not already too expansionary,” said the fund.