James Daniel, the International Montary Fund’s mission chief for Australia, announced that the IMF will be sending a special economic team to the country in order to assess the potential risks of real estate speculation, as well as examine record-high household debt. Daniel, speaking to the Australia Financial News, said the IMF visit was part of an overall health check-up of sagging Australian markets.
In his statement, Daniel warned that living standards in Australia were at risk because of slower economic growth and a lack of productivity.
“My understanding of the overall situation is that housing prices have gone through the roof, so we’ll definitely be talking about that,” Mr. Daniel stated. “Even if someone has concluded that housing prices are overvalued in market news today, what then should be our policy response?”
The IMF mission will examine the risks and dangers to Australia’s 24-year expansion streak coming to a screeching halt, with the potential of a housing bubble right at the top of its agenda.
Mr. Daniel emphasized that property prices were a factor of complex elements, including the undersupply of land, as well as the liberalization of financial markets. When people have easier access to credit, it might be reasonable that home prices would rise
The International Monetary Fund has forecast that Australia’s economy will continue to grow this year, predicted at 2.8%, while unemployment rates should peak at the current 6.4%. But it is expected that a fall in commodity prices and reduced investment may be partly ameliorated by a weaker Australian currency and low interest rates.
To prevent the economy from slumping further, the IMF has announced its intention to license the Australian government to implement tax reform. It is expected this demand will be for the government to lower both personal and corporate income taxes
while focusing more on the GST for revenue.
After what some economists have described as a “golden run” for the Australian economy over the past twenty years, the economy is currently facing serious problems as the investment phase wanes, meaning weak to non-existent development of non-mining businesses, while severe damage is being caused by falling iron ore and coal prices. Another threat is the current lack of consumer and business confidence, and unemployment over 6%.
“There’s no mistaking the issue. Australia’s biggest problem is productivity,” said Mr. Daniel. “There’s no way Australian living standards are going to continue to grow at the rate that we’ve seen in the past, at least not if nothing is done.”
The IMF’s final report on Australia is highly likely to have a significant impact on the government’s tax white paper, currently being prepared by Treasurer Joe Hockey.