Australia is well placed to weather the global downturn and contain inflationary pressures according to the International Monetary Fund (IMF).
In it’s country report on Australia, released yesterday the IMF said GDP would slow over the next two years, easing domestic capacity constraints and returning CPI inflation back within the RBA’s target band.
The RBA should, however, be prepared to act quickly to tighten monetary policy, should demand not slow as expected, the report said.
According to the report, the IMF considered the Australian banking system “sound” however warned that “some vulnerabilities remain”.
The IMF noted that while the banking sector remains profitable and well capitalised, the authorities were encouraged to "monitor carefully the sector's vulnerability to rollover risks arising from short-term wholesale funding and to the risks associated with the large indebtedness of the household sector".
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