The International Monetary Fund (IMF) has issued a stark warning for Australia, projecting the nation will experience a 'drawn-out persistence in above-target inflation'. This assessment comes as local economists and financial markets increasingly bet the Reserve Bank of Australia (RBA) will be compelled to raise interest rates later this year.
Key Data to Decide February Rate Decision
The immediate focus now shifts to two critical pieces of domestic data. Unemployment figures released on Thursday will be closely scrutinised, followed by the latest consumer price index (CPI) data the following Wednesday. The outcome of these reports is expected to be pivotal in determining whether the RBA's board will decide to implement an interest rate hike at its upcoming meeting on 3 February.
IMF's Global Outlook: Resilience and Hidden Risks
In its latest World Economic Outlook update, the Washington DC-based fund presented a mixed global picture. It noted the world economy has largely 'shaken off' the immediate threat posed by recent tariff shocks, attributed in part to a historic surge in technology-related investment in the United States and ongoing resilience in the Chinese economy.
Consequently, the IMF upgraded its forecast for global growth to 3.3% for this year, an improvement from the 3.1% estimate made in October. Remarkably, the organisation pointed out that current global projections are broadly unchanged from a year ago, despite the tariff disruptions.
However, the report struck a note of caution, highlighting that this surface-level stability 'masks underlying fragilities'. It specifically warned of risks tied to the heavy concentration of investment in the tech sector. Furthermore, the IMF cautioned that the negative growth effects of trade disruptions are likely to build up over time, suggesting ongoing headwinds for the global economy.
Steady Forecast for Australian Growth
For Australia specifically, the IMF left its core economic growth forecasts unchanged. It continues to project that the nation's real GDP will expand by 2.1% in the current fiscal year, followed by a slight acceleration to 2.2% growth in the next. This steady outlook contrasts with the heightened concern over the inflationary trajectory, which remains the primary economic challenge identified by the international body.
