The recovery of Australia’s economy and related exchange traded fund (ETF) is in full swing. Monetary and fiscal policies may start changing to nurture healthy growth.

Australia’s Central Bank Governor Glenn Stevens says that government stimulus spending will be eased and interest rates raised as the economy expands, reports Jacob Greber for Bloomberg.

Australia’s government has revealed an improvement of up to $12.3 billion in the past year’s budget and the improved outlook has contributed to a fall in long-term interest rates, according to AsiaOne News.

Despite the strides made, there are still pitfalls ahead.

The government projects budget deficits until 2016. Treasurer Wayne Swan stated that the shortfall will equal 4.9% of GDP in the year ending June 30 and net debt will peak at 13.8% of GDP in fiscal 2014.

Jobless rates were at 5.8% last month, with 664,000 unemployed, and Swan expects it to peak at 8.5% by June 2011. The Central Bank estimates unemployment rates to peak at “six-point something.”

The government job loss projections may be 230,000 too high because of better-than-expected economic performance, reports John Rolfe for The Daily Telegraph. This has signaled the Central Bank to begin raising interest rates from a 50-year low.

• iShares MSCI Australia Index (NYSEArca: EWA): up 60.8% year-to-date

For more information on Australia, visit our Australia category.

Max Chen contributed to this article.

Tags: Australia, EWA, Global ETFs