Mining tax : Australia gets IMF support
Australia on Wednesday received a surprise backing from the IMF over its controversial mining tax issue.
The International Monetary Fund gave a largely positive assessment of the Australian economy after an assessment on Thursday, while also backing the country's controversial mining tax.
The tax, which was watered down by the government after mining companies threatened to pull investment out of the country, is a "step in the right direction," according to the IMF, but said it must extend to cover more mineral resources. The current version of the resource rent tax only applies to iron ore and coal.
The fund said the Australian economy could grow as much as 3.5% in this year and the next, fueled by its mining boom. It said interest rates will have to go up further to contain inflationary pressures generated by the mining boom.
The Reserve Bank of Australia holds its October policy meeting on Tuesday, with most economists tipping a quarter percentage point hike to 4.75%.
Risks to Australia's outlook include uncertainties in the global economy, the lender said. "If the global recovery stalls and Chinese demand for commodities declines, Australia's terms of trade could fall sharply," it said.
On the domestic front, a fall in house prices could hit consumer confidence and slow the recovery, or the mining boom may have a larger than expected impact on output and inflation, the IMF said.
The IMF also said the Australian dollar was "mildly overvalued." "This overvaluation is likely to be temporary and may dissipate with the eventual normalization of interest rates in the United States and other advanced economies," it added.
The International Monetary Fund gave a largely positive assessment of the Australian economy after an assessment on Thursday, while also backing the country's controversial mining tax.
The tax, which was watered down by the government after mining companies threatened to pull investment out of the country, is a "step in the right direction," according to the IMF, but said it must extend to cover more mineral resources. The current version of the resource rent tax only applies to iron ore and coal.
The fund said the Australian economy could grow as much as 3.5% in this year and the next, fueled by its mining boom. It said interest rates will have to go up further to contain inflationary pressures generated by the mining boom.
The Reserve Bank of Australia holds its October policy meeting on Tuesday, with most economists tipping a quarter percentage point hike to 4.75%.
Risks to Australia's outlook include uncertainties in the global economy, the lender said. "If the global recovery stalls and Chinese demand for commodities declines, Australia's terms of trade could fall sharply," it said.
On the domestic front, a fall in house prices could hit consumer confidence and slow the recovery, or the mining boom may have a larger than expected impact on output and inflation, the IMF said.
The IMF also said the Australian dollar was "mildly overvalued." "This overvaluation is likely to be temporary and may dissipate with the eventual normalization of interest rates in the United States and other advanced economies," it added.
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