The Times Australia
The Times World News

.

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

Times Magazine

Building a Strong Online Presence with Katoomba Web Design

Katoomba web design is more than just creating a website that looks good—it’s about building an online presence that reflects your brand, engages your audience, and drives results. For local businesses in the Blue Mountains, a well-designed website a...

September Sunset Polo

International Polo Tour To Bridge Historic Sport, Life-Changing Philanthropy, and Breath-Taking Beauty On Saturday, September 6th, history will be made as the International Polo Tour (IPT), a sports leader headquartered here in South Florida...

5 Ways Microsoft Fabric Simplifies Your Data Analytics Workflow

In today's data-driven world, businesses are constantly seeking ways to streamline their data analytics processes. The sheer volume and complexity of data can be overwhelming, often leading to bottlenecks and inefficiencies. Enter the innovative da...

7 Questions to Ask Before You Sign IT Support Companies in Sydney

Choosing an IT partner can feel like buying an insurance policy you hope you never need. The right choice keeps your team productive, your data safe, and your budget predictable. The wrong choice shows up as slow tickets, surprise bills, and risky sh...

Choosing the Right Legal Aid Lawyer in Sutherland Shire: Key Considerations

Legal aid services play an essential role in ensuring access to justice for all. For people in the Sutherland Shire who may not have the financial means to pay for private legal assistance, legal aid ensures that everyone has access to representa...

Watercolor vs. Oil vs. Digital: Which Medium Fits Your Pet's Personality?

When it comes to immortalizing your pet’s unique personality in art, choosing the right medium is essential. Each artistic medium, whether watercolor, oil, or digital, has distinct qualities that can bring out the spirit of your furry friend in dif...

The Times Features

How much money do you need to be happy? Here’s what the research says

Over the next decade, Elon Musk could become the world’s first trillionaire[1]. The Tesla board recently proposed a US$1 trillion (A$1.5 trillion) compensation plan, if Musk ca...

NSW has a new fashion sector strategy – but a sustainable industry needs a federally legislated response

The New South Wales government recently announced the launch of the NSW Fashion Sector Strategy, 2025–28[1]. The strategy, developed in partnership with the Australian Fashion ...

From Garden to Gift: Why Roses Make the Perfect Present

Think back to the last time you gave or received flowers. Chances are, roses were part of the bunch, or maybe they were the whole bunch.   Roses tend to leave an impression. Even ...

Do I have insomnia? 5 reasons why you might not

Even a single night of sleep trouble can feel distressing and lonely. You toss and turn, stare at the ceiling, and wonder how you’ll cope tomorrow. No wonder many people star...

Wedding Photography Trends You Need to Know (Before You Regret Your Album)

Your wedding album should be a timeless keepsake, not something you cringe at years later. Trends may come and go, but choosing the right wedding photography approach ensures your ...

Can you say no to your doctor using an AI scribe?

Doctors’ offices were once private. But increasingly, artificial intelligence (AI) scribes (also known as digital scribes) are listening in. These tools can record and trans...