The International Monetary Fund says Australia ‘is managing a soft landing’ after years of global economic turmoil. Picture: Olivier Douliery / AFP
Treasurer Jim Chalmers has declared a major health check of Australia’s economy a “powerful endorsement” of Labor’s fiscal nous while accepting “there’s more work to do”.
In a report released overnight, the International Monetary Fund said Australia “is managing a soft landing” after years of global economic turmoil spurred on by the Covid-19 pandemic, supply chain disruptions, wars and trade tensions.
“Growth picked up to 2.1 per cent year on year in 2025Q3 after a weak 2024, as private demand gradually recovered,” the IMF said in a release.
“With the output gap narrowing, inflation declined steadily through 2025Q2, allowing monetary policy to be eased over the course of the year.
“However, inflationary pressures have re-emerged in recent months, bringing underlying inflation above 3 per cent in 2025Q3.”
It noted that Australia’s real GDP was forecast to have expanded by 1.9 per cent in 2025 and grow a further 2.1 per cent this year.
But it warned that “global uncertainty will continue to weigh on external demand and the current account is expected to remain in deficit into the medium term” and that inflation remained a threat.
The International Monetary Fund says Australia ‘is managing a soft landing’ after years of global economic turmoil. Picture: Olivier Douliery / AFP
“Risks to Australia’s economic outlook are skewed toward slower growth and higher inflation,” the Washington-based fund said.
“External threats such as global trade tensions, financial instability, and volatile commodity prices can potentially dampen demand and employment, while new trade agreements and greater regional integration could support resilience.
“Domestically, persistent inflationary pressures may arise from strong labour markets and constrained supply capacity; conversely, a slower-than-expected domestic demand recovery could increase unemployment.
“Climate events and shifting global energy demand remain significant medium-term challenges.”
Undertaking a media blitz on Monday, Mr Chalmers said the IMF had written “a very positive report about Australia and about the government’s economic plan”.
“It was a powerful endorsement of our responsible economic management and our reform agenda,” he told ABC radio.
“It described our budget management as effective.
“It described our agenda for productivity as bold and in the usual way, it made a number of suggestions about additional reforms.
“But the IMF was very positive about Australia and about the government in that report that it released overnight.”
He went on to say that there were challenges, including finding ways to keep Commonwealth coffers full enough to support public spending.
“Now we know that there’s more work to do to make our budget more sustainable, to make our economy more productive,” Mr Chalmers said.