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At his annual meeting in Washington, the International Monetary Fund’s chief economist, Pierre-Oliver Gourinchas, delivers a message that people have been desperately waiting for.
“We start with good news, the battle against inflation is almost won.”
But what comes next could be the message most Australians don’t want to hear.
While the IMF expects inflation to fall in most countries, Australia’s is expected to remain high.
It even predicts that Australia’s consumer price index will rise from 2.8 percent to 3.6 percent by the end of next year… making it the second country with the highest inflation by the end of next year, among 41 other countries.
The country expected to face the highest inflation rate will be Central Europe’s Slovakia, estimated at 4.8 percent by 2025.
And compared to Australia, other advanced economies like the UK, US and Canada will experience much lower inflation, at 2% or less.
Stephen Smith is a partner at Deloitte Access Economics. He says there are reasons why Australia is lagging behind in terms of slowing the rise in inflation.
“The first is that Australia was hit later than other countries by the surge in inflation, so it makes sense that Australia took a little longer to bring inflation under control. But the second factor is that the government in this current financial year has spent a lot of money on energy rebates, this is putting artificial downward pressure on inflation, and we expect that when these rebates resume next year, inflation will increase a little.”
The Australian Bureau of Statistics will release its latest quarterly data next week, but the Australian central bank is already signaling a slow arrival of rate cuts, according to its deputy governor Andrew Hauser on Monday.
Mr. Hauser also said he was surprised by the latest labor market data because he did not expect it to be as strong.
Last month, Australia recorded a stable unemployment rate of 4.1 percent, showing the labor market remains tight.
The figures raise further concerns about Australia’s economic growth, which is already at its slowest pace since the 1990s.
Deloitte’s Stephen Smith believes the Australian economy will be slow for the next few years.
“A few key elements are currently influencing the Australian economy. Firstly, the global environment has deteriorated over the past two months, particularly the outlook for China, which is experiencing significant structural challenges. The other big change in our forecast This is the deterioration of the housing market We now expect less than a million homes started in Australia over the next five years, compared to the government’s target of 1.2 million homes. These two elements mean that we have. lowered our expectations for economic growth in Australia throughout this calendar year and next.
Smith also worries about Australia’s productivity.
He points out that at present, the Australian economy is not dynamic enough to sustain growth.
“We also currently have an economy that is increasingly driven by the public sector rather than the private sector. Today these jobs are important in the care sector, for example in health and education, but they are generally less productive than private sector jobs.
The IMF’s economic forecasts for Australia have sparked strong reactions in Canberra.
Opposition Leader Peter Dutton said the IMF news would horrify many Australians.
“If the government put in place measures in the last three budgets, to reduce pressure on inflation, instead of upward pressure, Australian families would already be paying less for their mortgage. I think the IMF was pulling The real alarm bells here mean that the Albanian government has no idea what it is doing when it comes to economic management, and that is why inflation is higher here than in any other comparable country, and we are witnessing a situation in which “Australians are paying the price for poor economic decisions by the Albanian government.”
Housing Minister Clare O’Neil defends her government’s policies, but also acknowledges Australians are facing a cost of living crisis.
“People at home are really struggling to make ends meet, and to make just a dollar at the end of the week, at the end of the month, and the government is dedicated to that, that’s why you see, our government is making major cost of living moves, tax cuts for every Australian taxpayer, $300 relief on energy bills, the work we do, cheaper childcare , cheaper drugs, all these things help, but I just did it wouldn’t I We realize that things are really difficult at the moment and the government is doing everything it can to manage this macroeconomic situation, but it is. also assures that we are doing everything we can to help you and your family.”
A few months before the federal elections, the cost of living crisis should constitute a major issue for the two main parties.
