Australian mortgage holders: Australian mortgage holders hoping for a delayed Christmas gift next year might need to brace for further Reserve Bank rate hikes if inflation fails to ease.
The International Monetary Fund (IMF) has raised the grim prospect of another RBA interest rate increase in 2025, as highlighted in its annual economic assessment released just days before Christmas.
While core inflation has been gradually moving toward the RBA’s target range of 2-3 percent, the IMF, based in Washington, cautioned that 2025 could see another rate hike if disinflation slows.
Bleak Outlook for Australian Mortgage Holders: Rate Hikes Loom in 2025
If disinflation falters, stricter monetary and fiscal measures may be required,” the IMF stated in its update on Australia’s economy.
“Inflation is expected to consistently fall within the RBA’s target range only by late 2025, but any slowdown in disinflation presents a substantial risk.”
The IMF also expressed concern that the government’s current fiscal policy is counteracting the RBA’s restrictive monetary approach, undermining the overarching objective of reducing inflation.
IMF Flags Potential RBA Rate Hikes Amid Inflation Risks
Streamlining expenditures across all levels of government could help curb aggregate demand and accelerate inflation’s return to its target,” the report suggested.
It also highlighted that Australia’s progress in reducing inflation is lagging behind that of other comparable advanced economies.
“The RBA is among the last central banks to cut rates, alongside Norway’s Norges Bank, due to a later inflation peak and a correspondingly delayed rate-tightening cycle compared to some peers,” the IMF observed.
The IMF emphasized that next year’s economic agenda should prioritize tax reforms and addressing Australia’s housing affordability crisis.
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It reiterated its recommendation for the government to abolish the 50 percent capital gains tax discount as part of broader tax system reforms.
“A comprehensive policy approach is crucial to resolve Australia’s housing affordability challenges,” the report stated, highlighting the need to expand the construction workforce, ease zoning restrictions, promote initiatives to boost housing supply, and reassess property taxes and stamp duties.
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