Despite its growth forecast being lowered for year 2013, Australia, nonetheless, has zoomed to become the world's 12th largest economy, according to the latest World Economic Outlook (WEO) released on Tuesday by the International Monetary Fund (IMF).
A survey released by the US Heritage Foundation and the Wall Street Journal on Friday titled 2013 Index of Economic Freedom has placed Australia on the third spot, with Hong Kong still on the lead for the 19th straight year.
Because of Australia's risky exposure to the international commodities markets, coupled with its strong dependence on the economic activities of China, its major commodities trading partner for its coal and iron ore produce, the IMF reduced its forecast outlook of the resource-rich country from an earlier 3.5 per cent in April to 3 per cent for the current year.
Strong mining activity and related investment greatly spurred Australia's dynamic growth in recent years. But this is bound to be shaken because the outlook for its key trading partners, most especially China, is seen to become less buoyant.
"Growth in China is projected to be about 7.75 per cent this year and then to strengthen to 8.25 per cent in 2013 as domestic demand growth, especially investment growth, picks up with the policy easing now under way," the report said. China would still be the main driver of Australia's economic activity, but the IMF said it is highly improbable that the world's second-largest economy will return to double digit growth in the years ahead.
World's 12th Largest
Despite the lowered forecast outlook, IMF promoted Australia as the world's 12th largest economy, overtaking Spain, after 21 years of consistent economic growth.
Spain's fall, and the consequent jump of Australia, were closely tied to the economic policies pursued in both countries, Treasurer Wayne Swan said.
"While Spain has made a number of tough decisions over a number of years to try to put its economy back on track, it is currently enduring the economic and human impacts of a deep recession, including unemployment rates of around 25 per cent," he said.
"Through targeted measures to support our economy in the face of the worst global recession in 80 years, and keeping the doors of Australian businesses open, Australia was able to avoid the destruction of capacity in our economy that comes with a recession, in particular the human cost of high and long-term unemployment."
Although signs indicate Australia is also now fighting the effects of a decelerating mining boom, Mr Swan remained confident Australia will remain in a strong economic position.
"We have the enviable combination of solid growth, low unemployment, contained inflation, sound public finances and a large investment pipeline that is delivering greater economic capacity and export volumes," he said.
"Clearly there are challenges in parts of the economy, including the high Australian dollar and the continuing impact of global headwinds, however this historic milestone in Australia's economic growth story is something all Australians can be proud of."
Meanwhile, the IMF expects European policymakers to create definitive measures to combat the financial conditions of its struggling economies as it downgraded its growth forecast for the world to 3.3 per cent for 2012, and 3.6 per cent for 2013.
The Fund pointed out it would take at least 10 years for the global economy to heal from the effects brought about by the 2008 financial crisis.
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