Interest rates must stay high to end Australia's five-year inflation battle
The International Monetary Fund has urged Australia to keep rates elevated. Government spending must be slashed until inflation falls back to target.
The IMF released its review of Australia's economy on Thursday and backed the Reserve Bank's tough stance on inflation. The fund said rates must stay elevated as long as needed, even if the outlook turns gloomy.
Markets are pricing a three-in-four chance the RBA will raise the official cash rate to 4.6 per cent this month. Core inflation remains stuck at 3.6 per cent.
The IMF also warned that government spending is climbing and must be reined in. Combined Commonwealth and state deficits have widened over two years due to infrastructure, social programs and energy responses.
The fund did praise Australia's structural strength: relatively low public debt and a skilled workforce compared to other wealthy nations.
- 3.6 per cent
- Core inflation
- 4.6 per cent
- Expected RBA rate
- Three-in-four
- Probability of rate hike
- Five years
- Inflation battle duration
Why it mattersBorrowers facing higher mortgage payments should brace for rates to stay elevated longer than hoped. This will raise pressure on household budgets.
AustraliaAustralian mortgage holders and savers will feel the impact directly; the RBA's next move could push household debt servicing costs higher and delay any rate relief.
✓ Claims checked against the source. checked 8 d ago
