Australian Economy Still Strong, To Grow 3% in 2012 – IMF

Amid falling prices of commodities in the world market and slowing exports, resource-rich nation Australia will continue to enjoy economic growth, the International Monetary Fund (IMF) said on Thursday.

The Australian economy, based on IMF's preliminary findings, will grow by 3.25 per cent in 2012.

"We are forecasting some slowdown in the second half of the year but, looking at the entire year it (growth) will land around 3.3 or 3.2 per cent," Takeda Masahiko, deputy director in the IMF's Asia and Pacific Department, told reporters in Sydney.

Earlier this month, the Australian Bureau of Statistics reported the country's national economy grew by 0.6 per cent in the June quarter and 1.4 per cent in the March quarter.

However, Dr Takeda did not discount that prices of iron ore as well as coal will create a tremendous impact on Australia's economic growth.

"If iron ore prices become even weaker we will need to adjust pure forecasts."

On Tuesday, the Reserve Bank of Australia said prices of the steelmaking ingredient had fallen by 35 per cent since mid July.

Still, Dr Takeda believed Australia, along with its banking system, is very much equipped to respond positively to the changing economic climate.

"Australia has policy space to mobilise," he said.

This observation was echoed by the fund's monetary and capital markets division, which carried stress tests on the country's banking sector to see how well it would respond and manage a collapse in the Australian housing market.

"Even in the most extreme scenario the banking system fared pretty well," IMF chief of monetary and capital markets division Dr Cheng Hoon Lim told a forum in Sydney.

She said Australia's banking system, based on results of the stress tests, would hold up even a five per cent drop in GDP and 35 per cent fall in house prices.

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