The Deputy Managing Director of the International Monetary Fund (IMF), Murilo Portugal, has given a positive reading of the global economy but warned that financial stability remains fragile.
"We have revised upwards our projections for global growth this year to close to four percent and for next year 4.3 per cent. This represents an upward revision of three quarters of a percentage point from our October projection. This is the good news," Mr Portugal said in a lecture at the Australian School of Business at UNSW.
Mr Portugal is visiting Australia to meet with Reserve Bank and Treasury officials and government ministers.
Complimenting the federal government on its reaction to the global financial crisis, Mr Portugal said the policy response was very well designed and timely.
"Australia has done very well," he said.
"It was very resilient to the global turmoil."
Mr Portugal said he expects growth in Australia of two and a half per cent, picking up to three per cent next year, benefiting from China's demand for commodities. "You are in a good neighbourhood with China around," he said.
"China is the star. We are expecting growth there to reach 10 per cent this year."
The IMF's Deputy Managing Director warned that financial stability is still an issue and added that "in the medium term it is important to return to budget surpluses, to build in the room for eventual shocks, and be prepared for population ageing".
"In Australia the banking system was very resilient and solid," he said. The removal of government guarantees on large deposits is, he considered, an important sign of improvement in financial conditions.
Finance Professor Fariborz Moshirian said it was an honour to have Mr Portugal visit the School. Professor Moshirian has been collaborating with the IMF and the World Bank on financial globalisation, risk management and global financial stability.
Media contact: Marie Kelly | 9385 5895 | email@example.com