IMF warns of downside risks to Australia's economic outlook, calls for more government spending

The International Monetary Fund (IMF) released its annual report on Australia in which it said that the economic growth in Australia could moderate somewhat over the next two years and the pace of fiscal consolidation needs to be more gradual.

The fund noted that risks to the economy and inflation remained on the downside and said Australia needs to keep interest rates low and spend more on quality infrastructure for the economy to return to full employment, particularly against a weak global backdrop.

"Ensuring the return to full employment under weak global conditions will need continued accommodative monetary policy and quality infrastructure spending, which will also boost long-term growth potential," IMF staff wrote in their regular assessment.

The report recommended the conservative government of Malcolm Turnbull slow efforts to balance its budget on a five-year horizon. It said that the pace of targeted fiscal consolidation under the baseline should be more gradual and some of the growth-friendly spending should be ramped up.

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