This report summarizes the findings of the Financial Sector Assessment Program Update for Australia.
Five years after the U.S. sub-prime debacle triggered the global financial crisis (GFC), the Australian economy continues to thrive. Australia is one of the few advanced economies to avoid a recession, in part because of strong fundamentals at the onset of the crisis.
Growth dipped only briefly below trend during the crisis and rebounded quickly, supported by robust demand for commodities from China, which fueled a mining boom and pushed the terms of trade to 60-year highs. As a result, the current account deficit fell to about 2½ percent of GDP in the first half of 2011 from an average of 4½ percent for the previous 15 years.
Australia looks set to continue its two decades of uninterrupted expansion, with the economy expected to grow close to trend at 3-3.5 percent annually in 2012 and 2013. Inflation, meanwhile, is expected to remain subdued and well within the authorities’ target band of 2-3 percent over the medium-term.