The International Monetary Fund (IMF) has issued a “country report” on the Australian economy, warning that growth is weakening and inflation remains persistently high.
The IMF says: “Australia’s post-pandemic recovery remained strong. However, growth is weakening on the heels of tighter macroeconomic policies and financial conditions. While inflation has peaked, it remains persistently high. Labor market shows signs of easing, and the positive output gap is narrowing. Increased cost of living started to weigh on household consumption. The economy remains resilient in the near term but confronts a secular productivity slowdown. Financial stability risks remain contained although pockets of vulnerability exist and risks of spillovers from global financial conditions have increased.”
Inflation should gradually return to the Reserve Bank’s target range in 2026, the IMF says, while growth is expected to slow to around 1.4% in 2024.
The report says: “Faltering private consumption would continue to put a drag on the economy, as households with mortgages bear the brunt of higher interest rates, amidst lower real wages and depleting savings.”
The IMF commended authorities “for their recent measures to tackle skill shortages and improve labor market outcomes, particularly for women.” However, the report stresses “the need for further reforms to reignite productivity growth and foster inclusion.”