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IMF urges gradual approach to budget fix

AAP logoAAP 15/11/2016 Colin Brinsden, AAP Economics Correspondent

The International Monetary Fund believes the Turnbull government has set an ambitious pace to improve the budget which could prove counterproductive.

In its preliminary findings of its annual official visit to Australia, the IMF says the fiscal consolidation set out in the May budget is front loaded, especially in 2017/18.

"Australia has the fiscal space for undertaking more gradual consolidation to a balanced budget by 2020/21, the target in the budget," it said in a statement released on Tuesday.

It says budget targets have been missed over the past few years because of lower economic growth, but forging ahead with this consolidation would most likely have resulted in even lower growth over that period.

It says while general government spending on infrastructure has increased in 2016/17, this has largely been by the states.

"A more sustained, multi-year increase in spending on efficient infrastructure also at the commonwealth level would be desirable, considering that Australia has infrastructure needs and fiscal space and the funding environment is favourable," it says.

Treasurer Scott Morrison will release his mid-year budget review in December.

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