IMF Warns Australia Set For One Of Highest Inflation Rates In Developed World

The International Monetary Fund (IMF) says Australia is on track to have one of the highest inflation rates in the developed world.

In the latest edition of its World Economic Outlook, the global lender said economies around the world “face repercussions [from] the direct impact of higher commodity prices, indirect second-order effects on inflation expectations—which tend to be especially sensitive to energy and food prices—and amplification effects coming from [conservative] sentiment in financial markets.”

While the global economy had withstood “a series of shocks, yet another one—this time a military conflict engulfing the Middle East since the end of February—is testing this resilience,” the IMF warned.

It predicted that Australia’s GDP growth would remain flat this year at 2025’s level of 2.0 percent and would fall in 2027 to 1.7 percent.

Those figures are lower than previously projected, down from 2.1 percent for this year and 2.2 percent for next.

While that will be a consideration as Treasurer Jim Chalmers drafts his next budget for delivery on May 12, even more alarming is the forecast for inflation, with the consumer price index at 4.0 percent this year and 3.2 percent in 2027.

Those inflation figures exceed those of most advanced economies, including the United States (3.2 percent in 2026 and 2.1 in 2027), the UK (3.2 and 2.4), Germany (2.7 and 2.3), New Zealand (3.1 and 2.3), Japan (2.2 and 2.3),

Australia’s unemployment is also expected to be stubborn, at 4.2 and 4.3 percent respectively.

IMF Calls for Less State Intervention in Economy

Prior to the outbreak of the Iran War the IMF had intended to revise its growth forecasts upwards, but the closure of the Strait of Hormuz and attacks on oil and gas facilities reversed the positive momentum and raised the prospect of a major energy crisis, according to IMF chief economist Pierre-Olivier Gourinchas in a press briefing.

Under a “severe” scenario, in which an extended conflict results in greater damage to energy infrastructure, global growth would fall to 2 percent in 2026 and be perilously close to a global recession.

“What should we avoid?” Gourinchas asked.

“Price caps, subsidies, and similar interventions are popular, but they distort prices. They’re often poorly designed, hard to unwind, and extremely costly,” he said.

https://www.imf.org/en/news/articles/2026/04/14/tr-04142026-press-briefing-transcript-world-economic-outlook-spring-meetings-2026