Australia encouraged to keep interest rates low

The IMF believes Australia should keep interest rates low.


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By :  ,  Financial Analyst

Australia is being encouraged to keep its interest rates low while its economic growth continues to improve.

The International Monetary Fund (IMF) stated in its annual report on Wednesday (February 11th) that the southern hemisphere country should allow its interest rates to remain low while the exchange rate remains strong. The Australian government is working on reducing the nation's deficit and the IMF advised that monetary policy should be the main focus for managing economic demand.

Trading has been tough in Australia following the global financial crash in 2008/09 and it has been an uphill task for the government to bring the country in recovery. The IMF's report noted that the country should be looking to improve productivity and this will prove to be a major challenge if living standards are to be maintained.

The Washington-based institution said: "To achieve the aim of returning to and maintaining a budget surplus, sizeable cuts in projected spending would be required."

Responding to the IMF's report, treasurer Joe Hockey said that the government needed to make some difficult decisions in order to put the budget back on a "sustainable path". It could mean a reduction in spending to help boost productivity across Australia and help the country reach the levels seen prior to the recession.

Interest rates have been the focus of Bank of England recently with governor Mark Carney describing the nation's recovery as "neither balanced nor sustainable". Mr Carney stated that interest rates were likely to stay at 0.5 per cent for the foreseeable future, representing the lowest figure the country has seen in nearly five years.

The governor of the Bank of England said: "A few quarters of above-trend growth driven by household spending are a good start but they aren't sufficient for sustained momentum. For a sustained and balanced recovery, the degree of stimulus will need to remain exceptional for some time."

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