IMF: Further RBA tightening needed to ensure inflation returns to target range by 2025

In its annual assessment of the Australian economy, the International Monetary Fund (IMF) highlighted that the economy is reslient while inflation remains sticky, arguing that further policy tightening is required from the Reserve Bank of Australia (RBA).

Key takeaways

“After a strong post-pandemic recovery, Australia’s economy is slowing but remains resilient.” 

“Although inflation is gradually declining, it remains significantly above the RBA’s target and output remains above potential,”

“Staff therefore recommend further monetary policy tightening to ensure that inflation comes back to the target range by 2025 and minimize the risk of de-anchoring inflation expectations.”

“The Commonwealth government and state and territory governments should implement public investment projects at a more measured and co-ordinated pace, given supply constraints, to alleviate inflationary pressures and support the RBA’s disinflation efforts.”