On 15 February 2026 the IMF issued a report following consultations with Australia under Article IV of the IMF’s articles of agreement. Economic growth increased to 2.1%, year on year, in the third quarter of 2025, as private demand recovered, following weak growth in 2024. The economic recovery is projected to continue in the near-term and real GDP is estimated to have expanded by 1.9% in 2025 and is projected to grow by 2.1% in 2026 with improving consumer sentiment supporting private demand and investment. Higher global uncertainty will continue to depress external demand.
There are risks to Australia’s economic outlook from external threats such as global trade tensions, financial instability, and volatile commodity prices, new trade agreements and greater regional integration could support economic resilience. A slower-than-expected domestic demand recovery could increase unemployment. There are medium-term challenges from climate events and changing global energy demand.
In the near term, macroeconomic policies should remain flexible and responsive to external economic shocks. Australia’s economy is supported by robust institutions, flexible markets, and a range of policy tools allow management of the external risks from trade policy uncertainty and tighter global conditions.
The IMF report notes that the planned medium-term fiscal consolidation will help rebuild fiscal buffers. The report recommends comprehensive tax and expenditure reforms, prioritizing infrastructure investments to enhance productivity. There should be improved fiscal coordination between federal and State governments with regular monitoring of the subnational fiscal situation.
There is a need for ongoing vigilance, with oversight of the economy and system-wide stress-testing. A comprehensive strategy is needed to address housing supply constraints, with implementation of measures to increase the housing supply and tax reforms. Structural reforms should be sequenced to promote productivity, business dynamism and labour mobility. Streamlining of regulations is important, combined with leveraging technology and progressing labour market reforms.
The report notes that economic and trade diversification are important. Australia has opportunities from the green transition, but any related industrial policy should be restricted to addressing market failures and generating positive externalities.
