On 23 December 2024 the IMF staff issued a report following consultations with Australia under Article IV of the IMF’s articles of agreement.

Economic growth is projected increase gradually, from 1.2% in 2024 to 2.1% in 2025. Real income growth resulting from rising wages and tax cuts may increase private consumption, and public demand will continue to be strong. Growth is expected to remain below potential until 2026. The macroeconomic outlook is uncertain, with the balance of risks on the downside. External risks include weakness in Australia’s main trading partners, geoeconomic fragmentation affecting global trade, rising shipping costs, and volatile prices caused by the geopolitical situation.

In the medium term, wider tax and expenditure policy reforms should reduce structural deficits, promote economic efficiency and ensure fiscal sustainability in the longer term. The tax reforms should aim to increase efficiency and fairness, reducing dependence on direct taxes. Australia should phase out tax breaks like capital gains tax discounts. Expenditure reforms should aim to increase efficiency at all levels of government.

A comprehensive policy package is needed to manage Australia’s housing affordability crisis. The measures should focus on increasing the construction workforce, reducing zoning regulations and advancing initiatives to boost new housing supply. Property taxes and stamp duty should be reviewed.

Australia should prioritise productivity growth with a focus on competition policy, reforms in capital and labour markets and opportunities presented by AI technologies. Innovation should be enhanced by promoting research and development (R&D), supporting intellectual property rights and ensuring policy certainty. Access to training and upskilling for affected workers are essential to maximize the benefits of AI and reducing the risk of job displacement.