In an unusual move, the International Monetary Fund (IMF) has thrown its weight behind the case for the Reserve Bank of Australia (RBA) to increase rates yet again when it meets on Melbourne Cup Day.
Concerns about Aussie economy
The IMF's endorsement of a rise comes as concerns over continuing inflation continue to grip the Australian economy.
IMF mission chief Abdoul Wane emphasised the need for policy action to bring inflation back within the RBA's target range more rapidly.
While the RBA's latest forecasts indicate a return to the target range by late 2025, market expectations suggest a potential delay until early 2026.
In its statements the IMF called out Australia's substantial infrastructure spending programs, which have been driving costs higher and making it challenging to curb high and persistent inflation.
Transport experts and economists backed the IMF's call to scale back the record public infrastructure spending, which is competing for scarce labour and materials.
The IMF recommends that federal and state governments reduce the pace of infrastructure projects to ease inflationary pressures.
Source: IMF.
The IMF’s intervention has ignited a debate on whether the RBA should proceed with its 13th rate rise on Tuesday.
With fears of a wage-price spiral largely put to bed, there was high hope among mortgage holders that it would be the central bank's last increase in this cycle.
The IMF's report predicts that growth in real GDP will decelerate and inflation will remain at 4% by the end of next year.
The intervention by an international body underscores the gravity of Australia's inflationary challenge.
As the nation grapples with the delicate task of balancing inflation and economic growth, the central bank's decision next week will be closely watched by investors and policymakers alike.