International Monetary Fund projects Aussie inflation to stay above 3% in 2025

Australians are being urged to prepare for further financial pain after the International Monetary Fund issued a dismal prediction for next year.

Peter Dutton says Australians will be “horrified” after the International Monetary Fund (IMF) forecast Australia would be one of just two advanced economies with headline inflation north of 3 per cent by next year’s end.

The IMF World Economic Outlook, released overnight, has bumped Australia’s consumer price index forecast from 2.8 to 3.6 per cent for 2025.

In contrast Treasury forecasts in May showed inflation would fall to 2.75 per cent by mid-2025.

The IMF forecast puts Australia in second place behind Slovakia, and a full percentage point above New Zealand, the UK, the US, Japan and Singapore.

New Zealand, the UK and the US also had higher interest rates respectively which helped bring down inflation faster.

Coalition finance spokeswoman Jane Hume said on Wednesday the projections showed “there is a problem with Australia’s homegrown and sticky inflation”.

“Jim Chalmers and Anthony Albanese have been saying for some time that this is a global phenomenon that Australia is caught up in but clearly if we are up there with only Slovakia as a comparable country, the IMF are telling us that there is a problem with Australia’s homegrown and sticky inflation and, indeed, they’re calling ... for governments to show restraint in their spending so as not to fuel the inflation fire for longer and that’s what we’ve seen,” Senator Hume told Sky News.

Meanwhile, the Opposition Leader said Australians were “paying the price for bad economic decisions by the Albanese government”.

“I think every Australian will be horrified by the news from the IMF overnight that shows Australia really lagging at the back of the pack when it comes to inflation,” Mr Dutton said.

“If the government had have put in place the measures in the last three budgets to bring downward pressure on inflation, instead of upward pressure, Australian families would already be paying less for their mortgage.”

Quarterly data due out next week, by the Australian Bureau of Statistics is tipped to show inflation heading into the Reserve Bank of Australia’s target range of 2-3 per cent.

But, as pointed out by the IMF, the downward trajectory to 3 per cent in December is thanks to relief from government cost-of-living payments.

As the federal supports are unwound by the end of 2025, the IMF predicts inflation will soar to 3.6 per cent.

It is a significant upward revision from the 2.8 per cent forecast in April.

In its outlook, the IMF also warned against countries putting up walls, slicing margins for traders and forcing up prices for consumers.

“An intensification of protectionist policies would exacerbate trade tensions, reduce market efficiency, and further disrupt supply chains,” it said.

Australia’s GDP growth is tipped to remain sluggish and trail other advanced Asian economies for this year as a whole, but overtake the comparative benchmark next year.

Last year Australian GDP growth was a mile behind those comparable regional economies, at 2 per cent versus 5 per cent.

Originally published as International Monetary Fund projects Aussie inflation to stay above 3% in 2025