IMF: Australia economy to grow faster than forecast, global output to increase

The Australian economy is now projected to grow 3.5 per cent this year - 0.5 per cent higher than forecast in October.

The global economic outlook has been buoyed by the rollout of coronavirus vaccines. Picture: Getty Images

Australia’s economy will grow faster than previously forecast this year, as global growth accelerates following the roll-out of coronavirus vaccines, the International Monetary Fund says.

In new forecasts released overnight, the Washington-based organisation said it now expects global output to increase 5.5 per cent this year, higher than the 5.3 per cent it expected in October. The global economy shrunk 3.5 per cent, less than the 4.4 per cent forecast, it said.

The Australian economy is now projected to grow 3.5 per cent this year -- 0.5 per cent higher than forecast in October – and 2.9 per cent in 2022.

The IMF also upgraded the US economy, from the 3.1 per cent growth in 2021 forecast in October to 5.1 per cent, as well as India, Brazil and Japan.

China, the only economy which grew last year despite the pandemic, is expected to grow 8.1 per cent this year, a slight decrease in earlier projections.

In a statement, the IMF said the increased outlook for 2021 reflected “additional policy support in a few large economies and expectations of a vaccine-powered strengthening of activity later in the year, which outweigh the drag on near-term momentum due to rising infections.

“The upgrade is particularly large for the advanced economy group, reflecting additional fiscal support—mostly in the United States and Japan—together with expectations of earlier widespread vaccine availability compared to the emerging market and developing economy group,” the organisation said.

“However, surging infections in late 2020 (including from new variants of the virus), renewed lockdowns, logistical problems with vaccine distribution, and uncertainty about take-up are important counterpoints to the favourable news.

“Much remains to be done on the health and economic policy fronts to limit persistent damage from the severe contraction of 2020 and ensure a sustained recovery.”

The US authorised a $US900bn ($1.16tn) stimulus package in December, while the Biden administration has proposed a further $US1400 payment to most households.

In Australia, a CommSec report released on Wednesday shows states and territories less affected by the COVID-19 pandemic rebounding strongly, while NSW records its lowest comparative performance in eight years.

But CommSec chief economist Craig James said the economy was in a “very encouraging position” with strong job creation pushing unemployment lower.

The Australian Bureau of Statistics will today release inflation figures for the December quarter followed by labour force statistics on Thursday.