IMF praises Australian budget surplus plans

SYDNEY - Agence France-Presse

Australian Treasurer Wayne Swan briefs journalists at a media conference on the 2012 Federal Budget held in Parliament House, Canberra, May 8, 2012. REUTERS photo

The International Monetary Fund yesterday applauded Australia’s plan for a budget surplus, saying it will help “rebuild fiscal buffers”, in comments the government seized on as “a ringing endorsement”.

Treasurer Wayne Swan is set to unveil one of the toughest budgets in years for the mining-powered economy on Tuesday, with deep spending cuts expected to meet a targeted modest surplus next financial year.

Writing in The Australian Financial Review, IMF chief Asian economist Anoop Singh said a commitment to return to surplus in 2012-13 would put Australia in an even better position to buffer against economic shocks.

“In light of the historical terms of trade highs and the significant structural change in the economy, tighter fiscal policy combined with an easier monetary stance represents an appropriate policy mix,” he said.

However, he warned of an upside risk to the Australian economy, with investment in the resources sector potentially larger than expected, which would boost growth and push up wages and inflation.

Singh added that not all sectors of the economy were benefiting from the mining boom, and reforms were required to “build a more flexible economy” to ensure resilience.