IMF Backs More Rate Hikes as Inflation Fears Mount

The International Monetary Fund (IMF) has issued a report urging the Reserve Bank of Australia to continue hiking interest rates in order to combat inflation, which has been rising due to weak productivity growth and external factors. The IMF projects that Australia's economic growth rate will slow to 1.9% in 2026 and 1.6% in 2027.

The report cited the recent increase in oil prices and hotter-than-anticipated July inflation figures as reasons for the need for further interest rate hikes. However, the IMF also noted that if growth slows sharply, the Reserve Bank should consider cutting rates if inflation looks like getting under control.

Australia's productivity growth has been a major concern, with it going backwards over the last four years. The IMF welcomed the federal government's attempts to improve productivity but called for a 'more ambitious reform strategy' to boost competition and reduce over-regulation.

The report also suggested replacing stamp duty with a recurrent land tax and shifting the tax burden away from income and towards consumption.