IMF urges Canberra to prioritise efforts to revive productivity growth

The recommendations followed the recent conclusion of Article IV consultation with Australia by the IMF executive board.

Australia’s economic growth slowed to 1 per cent year on year (YoY) in the second quarter (Q2) this year from 1.9 per cent a year earlier, with private consumption growth dropping to 0.5 per cent YoY.

Growth in private business investment also eased to 1.6 per cent YoY. Economic activity was bolstered by public demand and infrastructure projects.

Labour market conditions have been softening gradually, with unemployment at 4.1 per cent in September this year, while job creation remains strong.

Australia’s growth is projected to pick up gradually, from 1.2 per cent in 2024 to 2.1 per cent in 2025, the IMF said in a release.

Real income growth from rising wages and tax cuts may boost private consumption, while public demand will remain strong. Private demand should also benefit from monetary easing and a pick-up in dwelling construction next year, but growth will remain below potential until 2026.

Unemployment is projected to rise gradually to 4.5 per cent.

With significant uncertainty surrounding the macroeconomic outlook, the balance of risks is tilted to the downside, the IMF noted.

Domestically, persistent labor market tightness, stronger than expected fiscal impulses and lower spare capacity than currently assessed could contribute to stalling the disinflation process, potentially leading to higher-for-even-longer interest rates that adversely impact consumption and investment, it added.

ALCHEMPro News Desk (DS)