{
  "title": "IMF Executive Board Concludes 2023 Article IV Consultation with Australia",
  "publication": "IMF News, January 19, 2024",
  "sourceUrl": "https://www.imf.org/en/news/articles/2024/01/18/pr2413-australia-imf-executive-board-concludes-2023-article-iv-consultation",
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  "summary": "The Executive Board of the International Monetary Fund (IMF) concluded the Article IV consultation with Australia.",
  "publishDate": "2024-01-19",
  "sections": [
    {
      "heading": "Macroeconomic assessment and near-term outlook",
      "content": "- The Executive Board concluded the Article IV consultation with Australia.\n- Australia’s post-pandemic recovery remained strong but growth is weakening due to tighter macroeconomic policies and financial conditions.\n- Inflation has peaked but “remains persistently high.”\n- Labor market indicators show signs of easing and the positive output gap is narrowing.\n- Increased cost of living is weighing on household consumption; households with mortgages are bearing the brunt of higher interest rates amid lower real wages and depleting savings.\n- The economy is resilient in the near term but faces a sustained slowdown in productivity growth.\n- Risks to the growth outlook are balanced; upside risks include robust immigration. Financial stability risks remain contained despite pockets of vulnerability and higher risks from global financial conditions."
    },
    {
      "heading": "Staff projections and key numerical outlook",
      "content": "- Growth projections:\n  - Growth is expected to slow to around 1.8 percent y/y in 2023 and 1.4 percent y/y in 2024.\n  - Executive Board noted potential need for further monetary tightening to achieve targeted inflation range by 2025 and recommended a data‑dependent approach.\n- Inflation and labor market:\n  - Under staff’s baseline projections, inflation would decline gradually and return to the RBA’s target range in 2026.\n  - Persistence in non-tradeable prices driven by demand pressures and a positive output gap amid tight labor markets would keep inflation elevated in the near term.\n  - Recent strong net migration inflows are expected to further alleviate labor market tightness but add to demand, especially in the rental market."
    },
    {
      "heading": "Executive Board Assessment — findings and recommendations",
      "content": "- Directors commended Australia’s sound macroeconomic policies that supported a strong recovery and resilience.\n- Fiscal policy:\n  - Directors welcomed progress on fiscal consolidation and commitment to debt sustainability.\n  - They underscored the need for a tighter fiscal stance to support disinflation.\n  - Directors saw merit in a comprehensive tax reform and highlighted rebalancing the tax system from direct to indirect taxes, while addressing regressive impacts, would promote greater efficiency.\n  - They recognized measures taken to contain spending growth and underscored the importance of well‑targeted support for vulnerable households.\n  - Implementing public investment projects at a more measured pace would also support disinflation efforts.\n- Monetary and financial stability:\n  - Directors highlighted potential need for further monetary tightening; recommended a data‑dependent approach.\n  - They welcomed measures to bolster financial stability and progress on implementing FSAP recommendations.\n  - Encouraged continued strengthening of macroprudential decision‑making and crisis management and resolution frameworks.\n  - Noting renewed increases in house prices, Directors recommended adoption of additional borrower‑based prudential tools.\n  - Supported initiatives to boost housing supply and emphasized supportive planning and land‑use policies.\n- Structural reforms and inclusion:\n  - Commended measures to tackle skill shortages and improve labor market outcomes, particularly for women.\n  - Stressed the need for further reforms to reignite productivity growth and foster inclusion.\n- Climate and emissions:\n  - Welcomed efforts to meet climate mitigation targets and highlighted the role of the Safeguards Mechanism in reducing emissions.\n  - Recognized meeting the 2030 climate target will be challenging and encouraged additional efforts to achieve net zero emission target by 2050.\n  - Welcomed focus on developing sectoral decarbonization plans and noted alternative sectoral policies can help reduce emissions."
    },
    {
      "heading": "Key quantitative indicators (selected series from Table 1)",
      "content": "- Real GDP (annual percent change, 2018–2027 as listed): 2.8, 1.9, -1.8, 5.2, 3.7, 1.8, 1.4, 2.0, 2.2, 2.3\n- Domestic demand (annual percent change, partial series): 2.7, 1.2, -2.2, 6.0, 4.7, 1.7\n- Private consumption (annual percent change, partial series): 2.4, 1.1, -5.8, 5.0, 6.5, 0.8, 2.9\n- Investment (percent of GDP, 2018–2028): 24.2, 22.6, 22.3, 23.1, 23.3, 23.8, 24.8, 25.0, 25.2, 25.3, 25.4\n- Private investment (percent of GDP, partial series): 18.9, 17.6, 17.3, 18.0, 17.7, 18.3, 19.2, 19.4, 19.6, 19.8\n- Savings (gross, percent of GDP, partial series): 22.0, 24.5, 26.2, 24.7, 24.4, 24.3, 24.6\n- Employment and labor market (selected): Employment growth entries include 3.1, 1.6; Unemployment (percent of labor force) entries include 5.3, 4.2, 4.4, 4.6\n- Wages (nominal percent change): 3.6\n- Consumer prices (avg): 6.6\n- Core consumer prices (avg): 5.5\n- GDP deflator (avg): 7.9\n- Terms of trade index (goods, avg): 83, 90, 109, 120, 108, 96, 95 (% change series: 8.4, 0.3, 21.4, 9.6, -9.9, -11.3, -0.1)\n- Iron ore prices (index): 101, 135, 156, 228, 174, 161, 137, 124, 114, 105\n- Reserve Bank of Australia cash rate target (percent, avg): (table header present)\n- 10-year treasury bond yield (percent, avg): 4.5\n- Mortgage lending rate (percent, avg): 4.8, 7.3, 8.3, 8.1, 7.6, 7.4\n- Credit to the private sector: 7.8\n- House prices (% change): -5.1, 23.7, 7.1\n- House price-to-income, capital cities (ratio): 4.9\n- Interest payments (percent of disposable income): 10.8, 13.3, 12.6, 11.9, 11.0, 10.4\n- Household savings (percent of disposable income): 15.5, 13.1, -0.3, 3.4\n- Household debt (percent of disposable income): 186, 185, 179, 187, 193, 190, 183, 182\n- Business credit (percent of GDP, 2018–2028 as listed): 50.4, 49.1, 50.1, 48.9, 49.3, 52.4, 54.1, 54.5, 55.1, 55.6, 56.1\n- General government (percent of GDP, selected series):\n  - Revenue: 35.6, 35.7, 34.5, 35.0, 36.0, 36.4, 37.3, 35.5, 35.1\n  - Expenditure: 36.8, 36.9, 42.1, 44.3, 40.0, 37.2, 39.2, 38.0, 36.6, 36.3\n  - Net lending/borrowing: -1.3, -1.2, -7.7, -9.3, -2.3, -1.5\n  - Gross debt: 41.3, 42.2, 52.7, 58.3, 53.5, 49.5, 54.4, 55.3, 56.0, 55.2\n  - Net debt: 32.1, 33.7, 27.1, 31.3, 33.4, 34.3, 33.9\n- Balance of payments and external sector (selected):\n  - Net international investment position (percent of GDP): -57.0, -50.1, -53.0, -38.3, -38.2, -32.5, -32.3, -31.4, -30.5, -29.7, -29.0\n  - Gross official reserves (bn A$): 76, 84, 56, 81, 85, …\n- Memorandum items:\n  - Nominal GDP (bn A$): 1,894, 1,992, 1,971, 2,189, 2,450, 2,536, 2,591, 2,721, 2,853, 2,995, 3,143\n  - Population (million): 25.1, 25.5, 25.6, 25.8, 26.3, 26.6, 26.9, 27.3, 27.6, 27.9, 28.3\n  - Nominal effective exchange rate: 90.0, 86.3, 86.0, 90.8, 90.3\n  - Real effective exchange rate: 85.3, 90.5, 90.7"
    },
    {
      "heading": "Policy implications and recommended actions (summarized)",
      "content": "- Monetary policy: Maintain data‑dependent approach; be prepared for further tightening if required to bring inflation to target by 2025.\n- Fiscal policy: Pursue tighter fiscal stance to support disinflation; continue fiscal consolidation and measured pace of public investment; consider comprehensive tax reform and rebalancing from direct to indirect taxes while addressing regressivity.\n- Financial stability: Strengthen macroprudential decision‑making and crisis management and resolution frameworks; consider additional borrower‑based prudential tools in light of renewed house price increases.\n- Housing and supply: Boost housing supply with supportive planning and land‑use policies to improve affordability.\n- Structural reforms: Implement measures to address skill shortages, improve labor market outcomes (especially for women), reignite productivity growth, and foster inclusion.\n- Climate policy: Consider additional efforts to achieve the 2030 and net zero by 2050 targets; develop sectoral decarbonization plans and leverage the Safeguards Mechanism.\n\nIMF Executive Board Concludes 2023 Article IV Consultation with Australia — Press Release No. 24/13 (January 18, 2024).\n\n---\n\n\n References\n\n- https://www.imf.org/-/media/images/imf/bios/imfboard.jpg\n- The Executive Board\n- Australia and the IMF\n- IMF Policy Advice -- A Factsheet\n- Press Releases\n- PRESS CENTER\n- http://www.IMF.org/external/np/sec/misc/qualifiers.htm\n- https://www.imf.org/en/home\n\nSource: https://www.imf.org/en/news/articles/2024/01/18/pr2413-australia-imf-executive-board-concludes-2023-article-iv-consultation"
    }
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    "Published: January 19, 2024",
    "The Executive Board concluded the Article IV consultation with Australia.",
    "Australia’s post-pandemic recovery remained strong but growth is weakening due to tighter macroeconomic policies and financial conditions.",
    "Inflation has peaked but “remains persistently high.”",
    "Labor market indicators show signs of easing and the positive output gap is narrowing.",
    "Increased cost of living is weighing on household consumption; households with mortgages are bearing the brunt of higher interest rates amid lower real wages and depleting savings.",
    "The economy is resilient in the near term but faces a sustained slowdown in productivity growth.",
    "Risks to the growth outlook are balanced; upside risks include robust immigration. Financial stability risks remain contained despite pockets of vulnerability and higher risks from global financial conditions.",
    "Growth projections:",
    "Inflation and labor market:",
    "Directors commended Australia’s sound macroeconomic policies that supported a strong recovery and resilience.",
    "Fiscal policy:",
    "Monetary and financial stability:",
    "Structural reforms and inclusion:",
    "Climate and emissions:",
    "Real GDP (annual percent change, 2018–2027 as listed): 2.8, 1.9, -1.8, 5.2, 3.7, 1.8, 1.4, 2.0, 2.2, 2.3",
    "Domestic demand (annual percent change, partial series): 2.7, 1.2, -2.2, 6.0, 4.7, 1.7",
    "Private consumption (annual percent change, partial series): 2.4, 1.1, -5.8, 5.0, 6.5, 0.8, 2.9",
    "Investment (percent of GDP, 2018–2028): 24.2, 22.6, 22.3, 23.1, 23.3, 23.8, 24.8, 25.0, 25.2, 25.3, 25.4",
    "Private investment (percent of GDP, partial series): 18.9, 17.6, 17.3, 18.0, 17.7, 18.3, 19.2, 19.4, 19.6, 19.8",
    "Savings (gross, percent of GDP, partial series): 22.0, 24.5, 26.2, 24.7, 24.4, 24.3, 24.6",
    "Employment and labor market (selected): Employment growth entries include 3.1, 1.6; Unemployment (percent of labor force) entries include 5.3, 4.2, 4.4, 4.6",
    "Wages (nominal percent change): 3.6",
    "Consumer prices (avg): 6.6",
    "Core consumer prices (avg): 5.5",
    "GDP deflator (avg): 7.9",
    "Terms of trade index (goods, avg): 83, 90, 109, 120, 108, 96, 95 (% change series: 8.4, 0.3, 21.4, 9.6, -9.9, -11.3, -0.1)",
    "Iron ore prices (index): 101, 135, 156, 228, 174, 161, 137, 124, 114, 105",
    "Reserve Bank of Australia cash rate target (percent, avg): (table header present)",
    "10-year treasury bond yield (percent, avg): 4.5",
    "Mortgage lending rate (percent, avg): 4.8, 7.3, 8.3, 8.1, 7.6, 7.4",
    "Credit to the private sector: 7.8",
    "House prices (% change): -5.1, 23.7, 7.1",
    "House price-to-income, capital cities (ratio): 4.9",
    "Interest payments (percent of disposable income): 10.8, 13.3, 12.6, 11.9, 11.0, 10.4",
    "Household savings (percent of disposable income): 15.5, 13.1, -0.3, 3.4",
    "Household debt (percent of disposable income): 186, 185, 179, 187, 193, 190, 183, 182",
    "Business credit (percent of GDP, 2018–2028 as listed): 50.4, 49.1, 50.1, 48.9, 49.3, 52.4, 54.1, 54.5, 55.1, 55.6, 56.1",
    "General government (percent of GDP, selected series):",
    "Balance of payments and external sector (selected):",
    "Memorandum items:",
    "Monetary policy: Maintain data‑dependent approach; be prepared for further tightening if required to bring inflation to target by 2025.",
    "Fiscal policy: Pursue tighter fiscal stance to support disinflation; continue fiscal consolidation and measured pace of public investment; consider comprehensive tax reform and rebalancing from direct to indirect taxes while addressing regressivity.",
    "Financial stability: Strengthen macroprudential decision‑making and crisis management and resolution frameworks; consider additional borrower‑based prudential tools in light of renewed house price increases.",
    "Housing and supply: Boost housing supply with supportive planning and land‑use policies to improve affordability.",
    "Structural reforms: Implement measures to address skill shortages, improve labor market outcomes (especially for women), reignite productivity growth, and foster inclusion.",
    "Climate policy: Consider additional efforts to achieve the 2030 and net zero by 2050 targets; develop sectoral decarbonization plans and leverage the Safeguards Mechanism.",
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