The International Monetary Fund (IMF) has issued a new economic assessment of Australia, advising the Reserve Bank of Australia (RBA) to raise interest rates further and calling on Treasurer Jim Chalmers to implement more aggressive tax and spending reforms. The IMF predicts that Australia's economic growth will slow to 1.9% in 2026 and 1.6% in 2027, with inflation remaining a concern due to weak productivity growth and rising energy prices.
Written locally by qwen2.5:14b on 2026-09-18,
using this article's own text rather than the other coverage of the
same event (that is the story summary below).
Story summary
The International Monetary Fund (IMF) has urged the Australian government to cut spending and warned that another interest rate hike is likely. This warning comes amid concerns over rising inflation and weak productivity growth in Australia. The IMF downgraded its economic forecast for 2027, predicting real GDP growth of just 1.6%, a reduction from previous estimates. The report also highlighted the need for reforms to address issues like negative gearing, which encourages excessive housing investment and drives up property prices. With three interest rate hikes already implemented by the Reserve Bank of Australia (RBA), the IMF advises further tightening if global energy prices rise, potentially leading to more rate increases in September 2023. Treasurer Jim Chalmers faces pressure to implement bolder tax reforms to address these economic challenges.
Written for “IMF Warning Australia On Spending” on 2026-09-18,
grounded in this article and the 1 other(s) covering the same event.
A global financial body has given the Reserve Bank the green light to hike interest rates and urged Treasurer Jim Chalmers to be bolder on tax reform.
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body → give → reform
With a breakout in price growth hitting Australians' living standards, returning inflation to target in the near term should be the top priority, the International Monetary Fund said in its latest report on the nation's economy on Thursday.
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Fund → hit → Thursday
The 'soft landing' the IMF identified in its last mission to Australia in February had ended with a thud, thanks in part to weak productivity growth and the Middle East conflict.
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IMF → identify → growth
The IMF projected Australia's economic growth would slow to 1.9 per cent in 2026 and 1.6 per cent in 2027, following three RBA rate hikes so far.
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growth → project → hikes
Rising oil prices, hotter-than-anticipated July inflation figures, and hawkish commentary from the bank's top brass in recent weeks have raised expectations the RBA will follow the Federal Reserve in hiking rates at its September meeting.
'Given persistent underlying inflation pressures and large uncertainty around whether financial conditions are sufficiently restrictive, the RBA should stand ready to hike rates as needed,' the IMF said.
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IMF → rise → rates
Further increases in energy prices could push prices even higher and lift inflation expectations, which could warrant more rate rises, it said.
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it → push → rises
But the RBA has a delicate balancing act to manage.
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RBA → have → act
If growth slows sharply, it should consider cutting rates, but only if inflation appears to be coming under control, the IMF said.
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IMF → slow → control
A report by the IMF has ramped up pressure on Treasurer Jim Chalmers to cut spending
Part of the difficulty in controlling inflation has been Australia's weak productivity growth, which has gone backwards over the past four years.
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which → ramp → years
Declining productivity has limited the speed at which the economy can grow without pushing up inflation and has weighed on Australians' living standards.
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economy → decline → standards
The IMF welcomed the federal government's attempts to improve productivity but called for a 'more ambitious reform strategy' to boost competition, reduce over-regulation and rebalance the tax system.
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IMF → welcome → system
It recommended replacing stamp duty with a recurrent land tax and shifting the tax burden away from income and towards consumption.
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It → recommend → consumption
The IMF urged federal and state governments to cut back on spending amid rising debt levels, noting the difficulty the government would face in implementing 'difficult' NDIS reforms.
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government → urge → reforms
Changes to property investor tax breaks in the federal budget also got the IMF's tick of approval for helping to fix the housing market, although the recent fall in house prices was not enough to address affordability.
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fall → get → affordability
'Recent budget measures to support enabling infrastructure, build-to-rent housing, and social and affordable housing are welcome, and recent tax changes should reduce some demand-side distortions,' the report said.
But the IMF also noted unintended consequences from the reforms, urging the government to minimise compliance costs and the impact on investment.
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IMF → support → investment
Australia's productivity growth has gone backwards over the last four years
HSBC chief economist Paul Bloxham predicts prices will fall 13 per cent from peak to trough.
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prices → go → trough
That should slow economic growth by 0.4 per cent over six months, helping the RBA get inflation back to target, he said.
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he → slow → target
The treasurer said the IMF's report backed the government's budget changes and ongoing focus on productivity.
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report → say → productivity
'It's a timely endorsement of our economic strategy at a time of accelerating change and uncertainty in the global economy,' Dr Chalmers said.
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Chalmers → accelerate → economy
Further efforts to boost supply, such as providing more enabling infrastructure and improving productivity in the construction sector, were also encouraged.
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efforts → boost → sector
But it could also put pressure on the construction sector and lead to higher electricity costs if new renewable energy projects were not built quickly enough, it said.
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it → put → costs
Shadow treasurer Tim Wilson said the IMF's report card showed Labor was worsening inflation through excessive spending, causing Australians to fall further behind.
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Australians → say → spending
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