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Highlights
- Australia’s inflation forecast for 2025 has been raised to 3.6%.
- IMF report warns of potential global trade tensions and economic risks.
- Australia’s projected inflation will outpace most advanced economies.
Australia’s inflation rate is expected to surge beyond most advanced economies, placing the country second only to Slovakia in inflation growth, according to the latest projections from the International Monetary Fund (IMF). This warning comes from the IMF's recently published World Economic Outlook, which raised Australia’s consumer price inflation forecast for 2025 from an earlier estimate of 2.8% to a higher 3.6%.
This revised projection casts a spotlight on the challenges facing the Albanese Government and the Reserve Bank of Australia (RBA). Rising inflation, in conjunction with broader global economic headwinds, places increasing pressure on policymakers to manage both domestic and international factors effectively.
As part of efforts to tackle these challenges, Australian Treasurer Jim Chalmers is currently attending high-level meetings in the United States, where key economic discussions are taking place. These talks are happening amid the IMF’s latest downgrade to Australia’s economic growth outlook for 2023, which now stands at 1.2%, down from a previous estimate of 1.5%. This downgrade adds another layer of complexity to the country’s economic policy direction.
In addition to Australia’s inflation trajectory, the IMF has highlighted several global risk factors that could impact the broader economy. These include the upcoming elections in the United States, which may lead to changes in trade policies, and concerns over the uncertain future of China’s economy. The IMF warns that increased protectionist policies could exacerbate trade tensions, potentially disrupting global supply chains—a concern that many countries, including Australia, are keeping a close eye on.
Despite hopes for moderation, the IMF still expects Australia’s inflation to ease to 3% by the end of this year. However, the rebound forecast for 2025 remains a point of concern. With a projected inflation rate of 3.6%, Australia is expected to significantly exceed the inflation levels of other advanced economies such as Japan, which is forecasted at 1.8%, and both the US and Canada, which are projected at 1.9%.
The report emphasizes the need for credible fiscal adjustments to address these economic challenges. As global competition intensifies and external factors remain volatile, governments around the world, including Australia, may need to recalibrate their fiscal strategies to avoid further economic strain.
Treasurer Chalmers has reaffirmed the Australian government’s commitment to addressing rising inflation while simultaneously supporting measures to alleviate cost-of-living pressures and boost productivity.
