{ "title": "IMF Executive Board Concludes 2024 Article IV Consultation with Australia", "publication": "IMF News, December 23, 2024", "sourceUrl": "https://www.imf.org/en/news/articles/2024/12/18/pr-24482-australia-imf-executive-board-concludes-2024-aiv-consultation", "canonical": "https://www.imf.org/en/news/articles/2024/12/18/pr-24482-australia-imf-executive-board-concludes-2024-aiv-consultation", "overlayPath": "/en/news/articles/2024/12/18/pr-24482-australia-imf-executive-board-concludes-2024-aiv-consultation/index.md", "summary": "The Executive Board of the International Monetary Fund (IMF) concluded the Article IV consultation with Australia on December 2, 2024, and endorsed the staff appraisal without a meeting on a lapse-of-time basis.", "publishDate": "2024-12-23", "sections": [ { "heading": "Summary of Recent Developments", "content": "- Executive Board concluded the Article IV consultation with Australia on December 2, 2024, and endorsed the staff appraisal without a meeting on a lapse-of-time basis.\n- Australia’s economic growth slowed to 1.0 percent (y/y) in Q2 2024 from 1.9 percent a year prior.\n- Private consumption growth dropped to 0.5 percent (y/y) in Q2 2024.\n- Growth in private business investment eased to 1.6 percent (y/y).\n- Public demand and infrastructure projects bolstered economic activity.\n- Unemployment was 4.1 percent in September 2024, with labor market conditions softening gradually while job creation remained strong.\n- The current account returned to deficit in early 2024 as commodity prices normalized.\n- Inflation dropped to 2.8 percent (y/y) in Q3 2024, with underlying pressures persisting, especially in non-tradable sectors.\n- National housing prices have surpassed pandemic peaks and rents have risen amid historically low vacancy rates.\n- The government achieved a budget surplus in FY2023/24, for the second year in a row, while implementing cost-of-living measures." }, { "heading": "Near-term Outlook and Projections", "content": "- Growth projection: 1.2 percent in 2024, rising to 2.1 percent in 2025.\n- Labor market projection: Unemployment is projected to rise gradually to 4.5 percent.\n- Inflation projection: Trimmed mean inflation expected to return to the RBA’s target range by end-2025 and the mid-point in 2026; headline inflation to be more volatile due to temporary energy rebates.\n- Drivers of projected pick-up in 2025:\n - Real income growth from rising wages and tax cuts may boost private consumption.\n - Public demand will remain strong.\n - Private demand to benefit from monetary easing and a pick-up in dwelling construction.\n- Growth is expected to remain below potential until 2026.\n- Balance of risks: Tilted to the downside with significant uncertainty around the macroeconomic outlook." }, { "heading": "Downside and External Risks", "content": "- Domestic downside risks:\n - Persistent labor market tightness and stronger-than-expected fiscal impulses could stall disinflation.\n - Lower spare capacity than currently assessed could lead to higher-for-even-longer interest rates, adversely impacting consumption and investment.\n- Alternative domestic scenario:\n - Weaker-than-expected growth or a faster-than-projected increase in unemployment may prompt the Reserve Bank to lower interest rates sooner.\n- External risks:\n - Weakness in major trading partners.\n - Geoeconomic fragmentation affecting global trade.\n - Rising shipping costs and volatile energy and food prices amid escalating geopolitical tensions.\n - These external shocks could complicate the disinflation process." }, { "heading": "Executive Board Assessment — Main Messages", "content": "- Australia remains on a narrow path to a soft landing, but risks are tilted to the downside.\n- Growth slowed in the first half of the year; household consumption is weak as real incomes remained soft.\n- Despite rising unemployment, the labor market remains resilient.\n- Growth is expected to pick up over the following quarters, supported by a gradual recovery in private demand and robust public demand.\n- Downside risks include persistent weakness in private demand or a further slowdown in key trading partners." }, { "heading": "Policy Guidance — Near Term", "content": "- Monetary policy:\n - Current restrictive monetary stance is appropriate to manage the final descent of inflation to target.\n - Monetary policy should be prepared to tighten further if upside inflation risks materialize.\n- Fiscal policy:\n - Fiscal policy should avoid an expansionary stance and complement monetary policy’s disinflation objective.\n - Expenditure rationalization at all levels of government could help reduce aggregate demand and support a quicker return of inflation to its target.\n - Reprofiling public infrastructure investments and improving targeting of transfer programs can mitigate excess demand while supporting the most vulnerable.\n- Institutional:\n - Reforms aimed at further bolstering the RBA's independence and supporting coordination of monetary and fiscal policies are important.\n- Contingent macro policy mix:\n - If disinflation stalls, tighter monetary and fiscal policies may be necessary to ensure monetary and fiscal authorities complement each other and avoid overburdening any single policy instrument." }, { "heading": "Policy Guidance — Medium Term and Structural Reforms", "content": "- Fiscal framework and public finances:\n - Broader tax and expenditure policy reforms should reduce structural deficits, promote economic efficiency, and safeguard long-term fiscal sustainability.\n - Tax reforms should focus on efficiency and fairness, reducing dependence on direct taxes and high capital costs, and phasing out tax breaks like capital gains tax discounts.\n - Expenditure reforms should enhance efficiency and contain structural spending growth across all levels of government given demographic headwinds and climate change.\n - Consider further strengthening fiscal policy frameworks with a clearer medium-term anchor to guide buffer rebuilding.\n- Financial sector and housing:\n - Macroprudential policies should remain stringent to protect household balance sheets amid rising housing prices.\n - Authorities encouraged to proactively adapt macroprudential tools to preempt excessive buildup in household indebtedness, including when monetary easing is appropriate.\n - Comprehensive policy package to address housing affordability: increase the construction workforce, relax zoning regulations, advance initiatives to boost new housing supply, and reevaluate property taxes and stamp duty.\n- Productivity and innovation:\n - Prioritize efforts to rejuvenate productivity growth through competition policy, reforms in capital and labor markets, and opportunities presented by AI technologies.\n - Enhance innovation by promoting R&D, supporting intellectual property rights, and ensuring policy certainty.\n - Improve competition landscape, assess non-compete clauses, and reform merger rules.\n - Promote public awareness, access to training, and upskilling for workers affected by AI to maximize productivity benefits while mitigating job displacement risks.\n- Climate and green policy:\n - Green industrial policy initiatives should be confined to narrow objectives where market failures exist and be consistent with international obligations.\n - Transition to a greener economy requires mitigation, adaptation, and transition policies.\n - Achieving emission reduction goals depends on addressing construction bottlenecks and community engagement; potential solutions include an economy-wide carbon price or targeted sectoral policies.\n- Governance:\n - Australia’s voluntary participation in reviewing transnational corruption is a positive signal for global governance improvements." }, { "heading": "Key Statistics and Table Highlights (selected exact figures)", "content": "- Q2 2024 real GDP growth: 1.0 percent (y/y).\n- Q2 2023 real GDP growth: 1.9 percent (y/y) a year prior.\n- Private consumption growth (Q2 2024): 0.5 percent (y/y).\n- Private business investment growth (Q2 2024): 1.6 percent (y/y).\n- Unemployment: 4.1 percent in September 2024.\n- Inflation: 2.8 percent (y/y) in Q3 2024.\n- Growth projections: 1.2 percent in 2024; 2.1 percent in 2025.\n- Projected unemployment: 4.5 percent (gradual rise).\n- Trimmed mean inflation: expected to return to RBA’s target range by end-2025 and the mid-point in 2026.\n- Selected entries from Table 1 (annual percent change or exact values as reported):\n - Real GDP: 2019: 1.8; 2020: -2.1; 2021: 5.5; 2022: 3.9; 2023: 2.0; 2024: 1.2; 2025: 2.1; 2026: 2.3; 2027: 2.2.\n - Private consumption: 2019: 0.9; 2020: -6.1; 2021: 5.1; 2022: 7.2; 2023: 1.0; 2024: 2.5; 2025: 2.7.\n - Unemployment (percent of labor force): 2019: 5.2; 2020: 6.5; 2021: 3.7; 2022: 4.6.\n - Terms of trade index (goods, avg): 2019: 77; 2020: 94; 2021: 103; 2022: 96; 2023: 90; 2024: 87; 2025: 86.\n - Consumer prices (avg): 2022: 6.6.\n - Core consumer prices (avg): 2023: 5.3; 2024: 3.6.\n - Investment (percent of GDP) 1/: 2019: 22.5; 2020: 22.3; 2021: 23.3; 2022: 23.7; 2023: 24.0; 2024: 24.2; 2025: 24.1.\n - Household debt (percent of disposable income) 2/: 2019: 186; 2020: 181; 2021: 187; 2022: 188; 2023: 185; 2024: 182; 2025: 178; 2026: 177; 2027: 176.\n - Gross debt (general government, percent of GDP): 2019: 42.1; 2020: 52.5; 2021: 58.0; 2022: 52.9; 2023: 49.2; 2024: 49.8; 2025: 49.4; 2026: 48.4; 2027: 47.5; 2028: 46.5.\n - Nominal GDP (bn A$): 2019: 1,996; 2020: 1,977; 2021: 2,206; 2022: 2,481; 2023: 2,618; 2024: 2,716; 2025: 2,837; 2026: 2,978; 2027: 3,114; 2028: 3,257; 2029: 3,409.\n- Sources cited in the table: Authorities' data; IMF World Economic Outlook database; and IMF staff estimates and projections.\n\nIMF Communications Department — Press Release No. 24/482 (December 23, 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/2024/12/18/pr-24482-australia-imf-executive-board-concludes-2024-aiv-consultation" } ], "bullets": [ "[Markdown version](/en/news/articles/2024/12/18/pr-24482-australia-imf-executive-board-concludes-2024-aiv-consultation/index.md)", "[Structured JSON version](/en/news/articles/2024/12/18/pr-24482-australia-imf-executive-board-concludes-2024-aiv-consultation/index.json)", "[Bundle manifest](/en/news/articles/2024/12/18/pr-24482-australia-imf-executive-board-concludes-2024-aiv-consultation/bundle-manifest.json)", "Published: December 23, 2024", "Executive Board concluded the Article IV consultation with Australia on December 2, 2024, and endorsed the staff appraisal without a meeting on a lapse-of-time basis.", "Australia’s economic growth slowed to 1.0 percent (y/y) in Q2 2024 from 1.9 percent a year prior.", "Private consumption growth dropped to 0.5 percent (y/y) in Q2 2024.", "Growth in private business investment eased to 1.6 percent (y/y).", "Public demand and infrastructure projects bolstered economic activity.", "Unemployment was 4.1 percent in September 2024, with labor market conditions softening gradually while job creation remained strong.", "The current account returned to deficit in early 2024 as commodity prices normalized.", "Inflation dropped to 2.8 percent (y/y) in Q3 2024, with underlying pressures persisting, especially in non-tradable sectors.", "National housing prices have surpassed pandemic peaks and rents have risen amid historically low vacancy rates.", "The government achieved a budget surplus in FY2023/24, for the second year in a row, while implementing cost-of-living measures.", "Growth projection: 1.2 percent in 2024, rising to 2.1 percent in 2025.", "Labor market projection: Unemployment is projected to rise gradually to 4.5 percent.", "Inflation projection: Trimmed mean inflation expected to return to the RBA’s target range by end-2025 and the mid-point in 2026; headline inflation to be more volatile due to temporary energy rebates.", "Drivers of projected pick-up in 2025:", "Growth is expected to remain below potential until 2026.", "Balance of risks: Tilted to the downside with significant uncertainty around the macroeconomic outlook.", "Domestic downside risks:", "Alternative domestic scenario:", "External risks:", "Australia remains on a narrow path to a soft landing, but risks are tilted to the downside.", "Growth slowed in the first half of the year; household consumption is weak as real incomes remained soft.", "Despite rising unemployment, the labor market remains resilient.", "Growth is expected to pick up over the following quarters, supported by a gradual recovery in private demand and robust public demand.", "Downside risks include persistent weakness in private demand or a further slowdown in key trading partners.", "Monetary policy:", "Fiscal policy:", "Institutional:", "Contingent macro policy mix:", "Fiscal framework and public finances:", "Financial sector and housing:", "Productivity and innovation:", "Climate and green policy:", "Governance:", "Q2 2024 real GDP growth: 1.0 percent (y/y).", "Q2 2023 real GDP growth: 1.9 percent (y/y) a year prior.", "Private consumption growth (Q2 2024): 0.5 percent (y/y).", "Private business investment growth (Q2 2024): 1.6 percent (y/y).", "Unemployment: 4.1 percent in September 2024.", "Inflation: 2.8 percent (y/y) in Q3 2024.", "Growth projections: 1.2 percent in 2024; 2.1 percent in 2025.", "Projected unemployment: 4.5 percent (gradual rise).", "Trimmed mean inflation: expected to return to RBA’s target range by end-2025 and the mid-point in 2026.", "Selected entries from Table 1 (annual percent change or exact values as reported):", "Sources cited in the table: Authorities' data; IMF World Economic Outlook database; and IMF staff estimates and projections.", "[https://www.imf.org/-/media/images/imf/bios/imfboard.jpg](https://www.imf.org/-/media/images/imf/bios/imfboard.jpg)", "[The Executive Board](https://www.imf.org/external/np/sec/memdir/eds.aspx)", "[Australia and the IMF](http://www.imf.org/external/country/AUS/index.htm)", "[IMF Policy Advice -- A Factsheet](https://www.imf.org/en/about/factsheets/imf-surveillance)", "[Press Releases](https://www.imf.org/en/news/searchnews)", "[PRESS CENTER](http://presscenter.imf.org/)", "[http://www.IMF.org/external/np/sec/misc/qualifiers.htm](http://www.imf.org/external/np/sec/misc/qualifiers.htm)", "[https://www.imf.org/en/home](https://www.imf.org/en/home)" ], "alternates": { "markdown": "/en/news/articles/2024/12/18/pr-24482-australia-imf-executive-board-concludes-2024-aiv-consultation/index.md", "json": "/en/news/articles/2024/12/18/pr-24482-australia-imf-executive-board-concludes-2024-aiv-consultation/index.json", "bundleManifest": "/en/news/articles/2024/12/18/pr-24482-australia-imf-executive-board-concludes-2024-aiv-consultation/bundle-manifest.json" }, "generatedAtUtc": "2026-09-26T03:31:22.497Z" }