TREASURER Wayne Swan has hosed down speculation that the Australian economy has recovered and is now heading into a long boom, warning optimists to
''take a cold shower and acknowledge the fragile state of the global recovery''.
A report prepared by the International Monetary Fund for this weekend's G20 meeting of finance ministers in Scotland urged advanced economies not to prematurely withdraw stimulus spending because the global recovery remained tenuous and patchy.
The Opposition has long demanded the early withdrawal of the stimulus spending, accusing the Government of over-reacting to the crisis and wasting billions of dollars of taxpayers' money.
But the report said rich nations should ''err on the side of further supporting demand and financial repair'', suggesting they should put concerns about economic growth and jobs ahead of worries about public debate.
''A key risk is that policy support is withdrawn before the recovery can achieve self-sustaining momentum, and that financial reforms are left to languish,'' the report said.
It follows news on Friday night that for the first time since 1983 more than 10 per cent of the American working age population is now classified as unemployed. The US unemployment rate jumped from 9.8 per cent to 10.2 per cent in October, with 15.7 million Americans now out of work.
Adding to concerns that the global recovery could be faltering, other figures released overnight revealed that Britain's economy shrank for a sixth consecutive quarter.
Attending the finance ministers' meeting, Mr Swan said the IMF report made it clear that there was ''a very long way to go until the global economy is in a sustained recovery''.
''So those calling for us to rip out stimulus support for jobs and business in Australia need to take a cold shower and acknowledge the fragile state of the global recovery,'' he said.
The IMF report said it believed the global economic recovery would be sluggish, while inflation would remain low.
''The most pressing policy challenges over the near term include maintaining economic recovery momentum,'' it said.
But the Reserve Bank, which last week lifted its official interest rate for a second consecutive month, appears to be more upbeat. On Friday it upgraded its 2010-11 growth forecast for Australia to 3 per cent, which is slightly above Treasury's recent forecast of 2.75 per cent.
In particular, while Europe and North America could remain weak for some time, the Reserve believes strong growth in China and India will fuel price surges for commodities such as coal, iron ore and liquefied natural gas, suggesting another long boom.
The IMF is predicting Australia will grow by just 0.7 per cent in 2009 and by 2 per cent in 2010.
http://www.theage.com.au/national/swan-sends-a-spray-at-prophets-of-boom-20091107-i2vt.html
