Australia's inflation rate is projected to outpace all advanced economies, with the exception of Slovakia, according to the latest forecasts from the International Monetary Fund (IMF).
The new projections, unveiled in the IMF World Economic Outlook, raised Australia’s expected consumer price inflation for 2025 from 2.8% to 3.6%.
This forecast intensifies scrutiny on the Albanese Government and the Reserve Bank of Australia (RBA) as they navigate rising inflation against a backdrop of global economic challenges.
As Treasurer Jim Chalmers heads to the United States for high-level discussions, the IMF has downgraded Australia’s economic growth outlook for 2023 to 1.2%, down from 1.5%.
The report highlights the potential risks associated with the upcoming US elections and the uncertain trajectory of China’s economy. The IMF warns that an increase in protectionist policies could heighten trade tensions and disrupt supply chains.
Despite the IMF's expectation that headline inflation will moderate to 3% by December, the forecast for 2025 indicates a troubling rebound. Australia’s projected inflation rate of 3.6% far exceeds those of other advanced economies, including Japan (1.8%) and the US and Canada (1.9%).
The IMF report underscores the necessity for credible fiscal adjustments, noting that many nations are turning to protectionist policies amid heightened external competition and economic fragility.
Chalmers emphasised the government's commitment to addressing inflation while supporting cost-of-living measures and fostering productivity.