Australian economy achieves the remarkable

9 Oct 2012, 6:18 pm   -   Source: AAP
Australia is now the 12th largest economy in the world, according to the latest IMF rankings. (AAP)

Australia is now the 12th largest economy in the world, according to the latest IMF rankings. (AAP)

Australia is now the 12th largest economy in the world, but it still faces growth risks in 2013, according to the International Monetary Fund.

Australia now has the 12th largest economy in the world, an achievement Treasurer Wayne Swan says is "remarkable" given the size of the population.

As the nation moved up the International Monetary Fund (IMF) rankings, the agency also raised its 2012 growth forecast for Australia, despite making across-the-board cuts to its global outlook.

Mr Swan said Australia had leapfrogged to the 12th spot over Spain, which is suffering under public debt, after previously overtaking South Korea and Mexico in the years since the Labor government came to power in 2007.

"As a country with the world's 51st largest population, this is a remarkable achievement," he said in a statement on Tuesday.

However, the IMF's World Economic Outlook (WEO) also warned of uncertainty in 2013.

In the report released in Tokyo on Tuesday, the agency said the global recovery had suffered "new setbacks" because major advanced economies had "not rebuilt confidence" for the medium term.

It cut its forecast for world output in 2012 to 3.3 per cent, from 3.5 per cent in July, and pegged growth at 3.6 per cent in 2013, from 3.9 per cent.

While it upgraded Australia's growth in 2012 to 3.3 per cent, from three per cent, it downgraded the outlook for the following year to three per cent, from 3.5 per cent.

Reserve Bank of Australia (RBA) deputy governor Philip Lowe told a conference in Hobart that if global growth came in at 3.5 per cent or higher next year "then I think Australia's going to be in a good position".

Mr Swan said the government was on track to return the budget to surplus in 2012/13, even though weaker global growth and lower commodity prices would make this task "more challenging".

The IMF also expects Australian unemployment to remain relatively low at 5.2 per cent this year, and at 5.3 per cent next year.

"Australia has one of the lowest unemployment rates among the advanced economies, an outcome that seemed improbable for much of my professional career," Dr Lowe told the Financial Services Institute of Australasia conference.

However, structural changes in the economy had led to a softening in employment growth in the past 12 months, with a 70,000 fall in construction jobs and a 50,000 decline in public servant positions.

When the RBA cut the official cash interest rate last week, it suggested mining investment could peak in 2013 and at a lower level than previously expected.

But Mr Lowe appeared optimistic about the outlook for the construction sector.

"Looking forward, a pick-up in construction activity is one of the factors that could provide an offset to the eventual moderation in the current very high level of investment in the resources sector," he said.

The National Australia Bank business survey for September released on Tuesday showed confidence in the construction sector jumped 16 index points to plus four points.

NAB believes the improvement has been due to a recent recovery in property prices and earlier RBA rate cuts.

  • Follow us: 
  • Follow us on Facebook
  • Follow us on Twitter
  • Follow us on Youtube