The Times Australia
The Times World News

.
The Times Real Estate

.

IMF endorses RBA high interest rates and warns a further hike might be needed if the inflation fight stalls

  • Written by Michelle Grattan, Professorial Fellow, University of Canberra

The International Monetary Fund has endorsed the Reserve Bank’s tough monetary policy – while warning rates might need to rise again if the fight against inflation stalls.

A report after IMF staff visited Australia, issued on Thursday, says the economy is resilient but faces challenges, including significant risks from abroad.

“Growth has slowed; while inflation is retreating from its peak, it remains elevated as demand-supply imbalances persist particularly in sectors like rents, new dwellings and insurance,” the report says.

A “modest” recovery is predicted for next year, taking growth from 1.2% in 2024 to 2.1% for 2025, marked by improvement in real incomes and resilient labour markets. But growth “will remain below its potential rate until 2026, when it is forecast to converge to 2.3%”.

“Near-term policies should continue to focus on reducing inflation while nurturing economic growth, ” the IMF says.

The Reserve Bank’s “continued restrictive monetary policy stance aimed at combating persistent inflation is appropriate”.

Underlying inflation is expected to sustainably return to the RBA’s target range of 2-3% at the end of next year, “with underlying price pressures easing only slowly”.

“Should disinflation stall, policies may need to be further tightened while preserving targeted support to vulnerable households amid rising living costs,” the report says.

It notes “underlying price pressures remain elevated”, pointing to rents, new dwellings, and insurance".

“While acute demand and supply imbalances in the housing market have begun to ease, national house prices have surpassed pandemic-era peaks and the momentum persists, with rents also rising significantly.”

“Addressing the housing affordability challenges requires a holistic approach to tackle the continued supply shortfall.”

The IMF stresses the need for improving productivity, with enhanced competition and innovation. AI technology should be leveraged “responsibly” and the climate transition navigated strategically.

“Efforts to rejuvenate Australia’s productivity growth, including through competition policy, should be prioritised, focusing on reforms across capital and labor markets.”

The IMF welcomes the second consecutive surplus, for 2023-24, announced this week.

It also backs the proposed new Monetary Policy Board for the Reserve Bank, which is so far blocked because of a lack of parliamentary support. The IMF says the policy is in line with international best practices. It would “bolster central bank operational autonomy and enhance monetary-fiscal policy synergies”.

The IMF advocates tax reforms to promote efficiency and fairness. They should reduce “reliance on direct taxes and high capital costs that hinder growth.

"Tax breaks, including from capital gains tax discount and superannuation concessions, could be phased out to generate a more equitable and efficient tax system.”

The IMF says coming environmental and demographic changes “will put structural upwards pressures on government spending.

"Expenditure reforms should therefore aim to enhance spending efficiency and sustainability,” the IMF says.

Treasurer Jim Chalmers said the IMF had endorsed the government’s economic management.

“The government’s primary focus is to get on top of our inflation challenge without ignoring the risks to growth and the IMF has backed this strategy.”

Read more https://theconversation.com/imf-endorses-rba-high-interest-rates-and-warns-a-further-hike-might-be-needed-if-the-inflation-fight-stalls-240443

The Times Features

Maximizing Space in Narrow Lot Homes: Smart Design Solutions

Urban housing markets continue to push homeowners toward smaller, narrower lots as land prices climb and city populations grow. These thin slices of real estate present unique de...

The Australian cast of BACK TO THE FUTURE: The Musical

Producers John Frost, Colin Ingram and the creators of the original film trilogy Robert Zemeckis and Bob Gale are thrilled to announce that Tony Award winner Roger Bart will do...

RCD Installation: Why It's Essential for Electrical Safety

Electricity is a powerful force that powers almost every aspect of our modern lives, but it can also be hazardous if not handled properly. Electrical hazards like electric shocks...

Why a Garage Shed is the Perfect Addition to Your Property

The most straightforward and most wholesome extension for any property. A garage shed is a potential solution for you, whether you are looking for an additional space for storage...

Revitalising Homes Through Strategic Architectural Renewal

Residential window replacement is one of the few home improvement interventions that goes far beyond simple aesthetic upgrades. Door frames and windows constitute these vital archi...

The Benefits of Animal-Assisted Speech Therapy For Children

Speech therapy has long been a standard for supporting children’s communication and emotional development. But what happens when you introduce a furry friend into the process? Th...

Times Magazine

CWU Assistive Tech Hub is Changing Lives: Win a Free Rollator Walker This Easter!

🌟 Mobility. Independence. Community. All in One. This Easter, the CWU Assistive Tech Hub is pleased to support the Banyule community by giving away a rollator walker. The giveaway will take place during the Macleod Village Easter Egg Hunt & Ma...

"Eternal Nurture" by Cara Barilla: A Timeless Collection of Wisdom and Healing

Renowned Sydney-born author and educator Cara Barilla has released her latest book, Eternal Nurture, a profound collection of inspirational quotes designed to support mindfulness, emotional healing, and personal growth. With a deep commitment to ...

How AI-Driven SEO Enhancements Can Improve Headless CMS Content Visibility

Whereas SEO (search engine optimization) is critical in the digital landscape for making connections to content, much of it is still done manually keyword research, metatags, final tweaks at publication requiring a human element that takes extensiv...

Crypto Expert John Fenga Reveals How Blockchain is Revolutionising Charity

One of the most persistent challenges in the charity sector is trust. Donors often wonder whether their contributions are being used effectively or if overhead costs consume a significant portion. Traditional fundraising methods can be opaque, with...

Navigating Parenting Arrangements in Australia: A Legal Guide for Parents

Understanding Parenting Arrangements in Australia. Child custody disputes are often one of the most emotionally charged aspects of separation or divorce. Parents naturally want what is best for their children, but the legal process of determining ...

Blocky Adventures: A Minecraft Movie Celebration for Your Wrist

The Minecraft movie is almost here—and it’s time to get excited! With the film set to hit theaters on April 4, 2025, fans have a brand-new reason to celebrate. To honor the upcoming blockbuster, watchfaces.co has released a special Minecraft-inspir...

LayBy Shopping