Australia will ride out global downturn: IMF

The Australian economy will continue to grow at a decent clip over the next couple of years despite the financial pressures rocking the global economy, the International Monetary Fund says.

The IMF predicts that Australia will grow by 3.2% in 2008 and 3.1% in 2009. Although down from last year’s 3.9% growth, that is still not far off the 3.3% average growth of the last decade.

And with that growth will come inflation – likely to be 3.5% this year and 3.3% in 2009, the IMF says, despite interest rate rises.

Apart from structural factors – a flexible exchange rate and strong government fiscal position – Australia’s exposure to still strong developing economies will be a key factor in continuing growth.

While the economies of China and India are expected to slow down somewhat, they will still manage a comparatively blistering growth rate of 9.4% and 8% respectively.

The growth of China and other developing countries will see global growth only fall slightly from 4.9% this year to 3.8%, despite the financial crisis the IMF recently described as the most costly the world has seen.

The US, however, will not be so lucky, with the IMF predicting periods of recession and less than 1% growth in 2008 and 2009.

That gloomy prognosis is reflected in the minutes of the most recent meeting of the US Federal Reserve Board released overnight.

They reveal the view of some officials on the board who believe the US is headed for a “protracted and severe” economic downturn and “persistent” house price and credit problems caused by the sub-prime crisis.

And more bad news for the US economy has emerged overnight. Oil prices in New York rose to a record $US112 per barrel on news that oil stocks in the US are at low levels, while new home sales fell a bigger than expected 1.9% in February.