IMF predicts severe inflation challenges ahead for Australia
The IMF has delivered a grim forecast for Australia, placing the nation second among countries expected to grapple with persistent inflation well into 2025.
The International Monetary Fund's (IMF) latest World Economic Outlook predicts Australia's inflation will drop to 3 per cent by the end of 2024, aided by subsidies like energy rebates, before rising again to 3.6 per cent by the close of 2025.
This contrasts with the Reserve Bank's projections, which anticipate inflation falling within its target range of 2–3 per cent by late 2025 and approaching the midpoint of the band by 2026.
The IMF has declared that the global fight against inflation has "largely been won," but Australia stands out as one of the few countries where price pressures are expected to persist.
“In most countries, inflation is now hovering close to central bank targets, paving the way for monetary easing across major central banks,” IMF’s Pierre-Olivier Gourinchas said.
In the US, the IMF is predicting inflation to drop to 1.9 per cent at the end of 2025, while the Euro area is expected to sit at 2 per cent. The only other country expected to face real challenges, besides Australia, is the Slovak Republic with inflation hovering just under 5 per cent.
Speaking to InvestorDaily, GSFM investment specialist Stephen Miller expressed scepticism about the forecast, saying he takes it "with a grain of salt”.
“I’d much prefer to believe the RBA forecasts,” Miller said, pointing out that the IMF’s predictions reflect headline inflation, which includes the impact of subsidies.
“The reacceleration looks a little curious… As far as monetary policy is concerned the most important are the trimmed mean outcomes in any case and I don’t have much cause to disagree with the RBA forecasts.”
On the flip side, the IMF offered a more optimistic outlook for unemployment in Australia, forecasting the jobless rate to drop to 4.1 per cent by the end of 2024 and rise slightly to 4.4 per cent by the end of 2025 – which equals the RBA’s expectations.
Treasurer Jim Chalmers is poised to join key economic ministers and central bank governors from the world’s largest economies at the G20, International Monetary Fund, and World Bank annual meetings in Washington, DC, over the coming days.
In a statement on Wednesday, the Treasurer said Australia faces the same volatility and vulnerabilities as the global economy, with escalating conflicts in the Middle East threatening to drive up oil prices and worsen the outlook.
“This is a really critical time to confer with colleagues and counterparts,” Chalmers said.
“There will be in‑depth discussions on the global economy, the energy transformation, economic security and reform of our multilateral institutions.”
