The International Monetary Fund (IMF) said on Wednesday that the Australian economy is robust enough to absorb global financial shocks as the world body praised the country's economic managers for bringing it into budget surpluses while noting that it is one of the few advance economies which emerged largely unscathed from the global financial crisis.

In a statement released in Washington, the IMF said that the federal government appropriately withdrew its fiscal policy stimulus at a time when the country's mining boom has been fuelling the national recovery, sparing the public coffers from unnecessary depletion and otherwise re-allocating federal funds for more pressing concerns.

The IMF warned though that Australia's economic managers must keep watch on the possibility of inflation as the rapid industrialisation of China could overwhelm the country's resource sector and inadvertently lift Australian household incomes.

The world body also raised concerns that Australia may be developing too close of an economic affinity with China as it fears that once global recovery hits a snag and Chinese demand for the country's commodities retreats, the nation's terms of trade could suffer considerable imbalance.

The IMF said that Australia's economy should grow by up to 3.0 percent in 2010 and reach a high of 3.5 percent in the following year though it called attention on the country's dipping house prices, which it said could hurt consumer confidence and stall recovery.

The sustained recovery being witnessed by the country should prompt the Reserve Bank of Australia (RBA) to push its policy rates in an upward surge to fend off possible inflation incidence as the IMF stressed that "if global markets come under severe stress because of concerns over European sovereign debt or world growth falters, the RBA is well positioned to respond."

The IMF added that Australia is heading into the right direction by introducing the planned minerals resource rent tax though the world body noted that covering only coal and iron ore mining could substantially reduce the effectiveness of the tax measures as compared to its previous version.

It suggested that consumer-based taxes could prove to be more efficient in pooling more funds for federal initiatives as it asserted that such tax measures generally encourage "the elimination of inefficient state taxes that impede labour mobility and allow federal personal income taxes to be cut."

The Australian government hailed the IMF report as a testament of the country's focused spending policy as Federal Treasurer Wayne Swan noted that "the IMF's views serve as the foundation for the government's determination to build on its economic successes, and create a stronger, broader, more competitive economy that benefits all Australians."