Australian economy on narrow path to soft landing, growth to slow: IMF

04 Feb '23

1 min read

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Australia’s economy is on a narrow path to a soft landing, with downside risks, and growth is expected to slow to 1.6 per cent this year from about 3.6 per cent in 2022, as higher interest rates and weaker global growth cut into domestic demand and net exports, according to the International Monetary Fund (IMF), whose executive board concluded the Article IV consultation with Australia last month.

Inflation is projected to decelerate gradually toward the 2-3 per cent target by end-2024. Downside risks to the economic outlook dominate, with significant uncertainty regarding global growth, commodity prices and domestic developments surrounding wages, housing prices, and the effect of tighter monetary conditions, the executive committee noted.

Tighter financial conditions, erosion of real incomes amid high inflation, declining housing prices, and soft global growth point to a significant deceleration in Australia. Inflation is projected to decline gradually but remains above target until 2024, subject to significant uncertainty.

Downside risks to growth stem from a stronger global downturn, persistently high inflation expectations, and rising geo-economic fragmentation, the IMF added.

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