IMF Wraps Up 2026 Article IV Talks With Australia

Washington, DC: On February 9, 2026, the Executive Board of the International Monetary Fund (IMF) concluded the Article IV consultation [1] with Australia.

The Australian economy is managing a soft landing. Growth picked up to 2.1 percent year on year in 2025Q3 after a weak 2024, as private demand gradually recovered. With the output gap narrowing, inflation declined steadily through 2025Q2, allowing monetary policy to be eased over the course of the year. However, inflationary pressures have re-emerged in recent months, bringing underlying inflation above 3 percent in 2025Q3. Labor market conditions are easing gradually after a period of tightness, although the unemployment rate, at 4.3 percent, remains low by historical standards. House prices have rebounded as financial conditions eased, and new dwelling investment has begun to pick up.

The economic recovery is expected to continue in the near-term. Real GDP is forecast to have expanded by 1.9 percent in 2025 and to grow by 2.1 percent in 2026 as the lagged impact of monetary easing and improving consumer sentiment support private demand and investment. Elevated global uncertainty will continue to weigh on external demand and the current account is expected to remain in deficit into the medium term. Inflation is projected to converge to the midpoint of the RBA's 2 to 3 percent target range by the latter half of 2027, as pressures on service prices ease and import costs remain stable. Wage growth is anticipated to moderate further, partially As put by weak productivity growth.

Risks to Australia's economic outlook are skewed toward slower growth and higher inflation. External threats such as global trade tensions, financial instability, and volatile commodity prices can potentially dampen demand and employment, while new trade agreements and greater regional integration could support resilience. Domestically, persistent inflationary pressures may arise from strong labor markets and constrained supply capacity; conversely, a slower-than-expected domestic demand recovery could increase unemployment. Climate events and shifting global energy demand remain significant medium-term challenges.

Executive Board Assessment [2]

Executive Directors welcomed Australia's progress toward a soft landing and internal balance, notwithstanding uncertainties regarding residual excess demand and supply capacity in the context of weak productivity growth. Directors emphasized that near-term macroeconomic policies should remain agile and responsive to external shocks. In this context, they commended Australia's robust institutions, flexible markets, agile policy toolkit, and flexible exchange rate, which position the country to manage external risks from trade policy uncertainties and tighter global financial conditions.

Directors welcomed the Reserve Bank of Australia's recent policy rate increase in response to the economic and inflation outlook. They supported the RBA's data-dependent monetary policy adjustment in line with its dual mandate of price stability and full employment and stressed the importance of continued vigilance given elevated uncertainty. They welcomed progress on the RBA Review recommendations, including efforts to improve policy communication and further strengthen central bank independence.

Directors supported the planned medium-term fiscal consolidation, which will help rebuild fiscal buffers, while also enhancing external rebalancing. They encouraged comprehensive tax and expenditure reforms, while protecting and prioritizing infrastructure investments to enhance productivity and support growth. Directors also recommended improved fiscal coordination across the federation and regular monitoring of subnational fiscal positions.

Directors considered that financial stability risks are contained, but stressed the importance of ongoing vigilance, oversight and system-wide stress-testing, and agile macroprudential adjustments. Directors highlighted the need for a holistic strategy to address housing supply constraints, emphasizing implementation of supply-boosting measures and tax reforms.

Directors underscored the importance of bundling and sequencing structural reforms to foster productivity, business dynamism, and labor mobility. Streamlining regulations, leveraging technology adoption, advancing labor market reforms, and continuing economic and trade diversification will be crucial. While noting the opportunities presented by the green transition, Directors cautioned that any related industrial policy should be narrowly focused to address market failures and generate positive externalities.

Table 1. Australia: Main Economic Indicators, 2021-2031

(Annual percent change, unless otherwise indicated)

2021

2022

2023

2024

2025

2026

2027

2028

2029

2030

2031

Projections

NATIONAL ACCOUNTS

Real GDP

5.4

4.2

2.1

1.0

1.9

2.1

2.2

2.3

Domestic demand

6.1

5.3

2.9

1.9

2.2

2.1

2.0

2.1

Private consumption

5.0

7.4

2.7

0.6

2.0

2.5

2.4

Public consumption

5.7

5.1

1.8

5.0

3.0

1.4

1.2

1.3

Investment

10.6

2.2

4.8

1.8

2.1

2.3

Public

7.0

4.1

10.7

3.2

-0.5

0.4

0.6

1.0

Private business

9.0

5.4

7.1

1.0

1.3

2.0

2.5

2.7

2.8

Dwelling

10.3

-2.6

-0.9

0.8

6.0

3.0

2.5

2.4

Net exports (contribution to growth, percentage points)

-1.6

-2.0

0.2

-1.0

-0.1

0.0

0.2

Gross domestic income

9.0

5.9

0.5

-0.3

1.5

2.0

1.7

1.9

2.1

2.2

Investment (percent of GDP) 1/

23.4

23.8

23.9

24.5

24.3

24.1

24.2

24.3

Public

5.0

4.9

5.5

5.7

5.5

5.4

5.3

5.2

5.1

Private

18.1

17.8

18.4

18.6

18.7

18.8

18.9

19.0

19.1

19.2

Savings (gross, percent of GDP)

25.7

24.4

23.3

22.4

22.0

21.9

Potential output

2.5

2.4

2.1

2.0

2.1

2.2

2.3

Output gap (percent of potential)

-0.3

1.4

1.2

0.1

0.0

LABOR MARKET

Employment

3.1

4.5

3.4

2.3

1.8

1.7

1.8

1.7

Unemployment (percent of labor force)

5.1

3.7

4.0

4.3

4.4

4.5

Wages (nominal percent change)

2.0

3.0

4.0

3.8

3.3

2.9

2.7

2.8

3.0

PRICES

Terms of trade index (goods, avg)

103

113

104

% change

22.0

9.8

-7.3

-6.9

-2.0

0.6

-2.0

-1.3

-0.7

-0.6

-0.4

Consumer prices (avg)

2.8

6.6

5.6

3.2

2.8

3.4

2.7

2.5

Core consumer prices (avg)

2.8

5.7

5.3

3.7

2.8

3.0

2.7

2.5

GDP deflator (avg)

5.9

8.2

3.4

2.6

2.7

2.9

2.2

2.3

FINANCIAL

10-year treasury bond yield (percent, avg)

1.6

3.6

3.9

4.2

4.4

4.5

4.4

4.3

Mortgage lending rate (percent, avg)

4.5

7.3

8.7

8.8

8.0

7.9

7.7

7.6

7.4

7.3

7.1

MACRO-FINANCIAL

Credit to the private sector

7.4

8.3

4.9

4.4

5.6

5.4

4.8

5.0

4.8

5.0

House prices (% change)

23.7

-4.9

8.3

6.1

7.2

5.6

4.8

4.9

House price-to-income, national median value (ratio)

7.8

7.4

7.6

7.7

Estimated interest payments (percent of disposable income)

5.2

6.9

7.6

7.4

6.9

6.8

6.7

Household savings (percent of disposable income)

13.2

7.0

2.1

3.7

5.8

5.6

4.6

4.8

4.7

Household debt (percent of disposable income) 2/

187

188

185

181

176

175

178

175

177

Business credit (percent of GDP)

48.4

48.5

48.9

48.4

47.7

48.0

48.2

48.5

48.8

49.0

49.4

GENERAL GOVERNMENT (percent of GDP) 3/

Revenue

34.8

35.5

35.9

36.5

36.6

36.8

36.7

36.2

36.3

Expenditure

44.1

39.3

36.7

38.2

39.8

39.6

38.7

38.1

38.0

37.8

37.7

Net lending/borrowing

-9.2

-3.7

-0.9

-1.6

-3.2

-2.9

-2.0

-1.9

-1.8

-1.5

-1.4

Commonwealth only

-6.9

-1.3

0.8

0.4

-1.1

-1.4

-0.9

-0.8

-0.7

Operating balance

-7.0

-1.5

1.5

0.7

-0.9

-1.5

0.0

0.1

0.2

0.5

0.6

Cyclically adjusted primary balance

-6.7

-2.6

-0.5

-1.2

-2.1

-1.8

-1.0

-0.9

-0.5

Gross debt

57.9

52.8

48.9

50.0

51.4

51.5

51.2

51.0

50.6

50.1

49.4

Net debt

37.8

33.3

30.4

31.6

32.9

32.8

32.5

32.4

32.2

31.7

31.1

BALANCE OF PAYMENTS

Current account (percent of GDP)

2.3

0.3

-0.4

-2.2

-1.9

-2.1

-2.2

-2.3

-2.4

Export volume

-2.3

2.6

6.8

1.1

2.5

3.4

3.3

3.1

3.2

Import volume

5.3

13.6

6.7

5.8

3.0

3.6

2.8

2.7

2.6

Net international investment position (percent of GDP)

-37.7

-37.2

-30.0

-23.0

-23.5

-24.4

-25.6

-26.8

-27.9

-29.1

-30.2

Gross official reserves (bn A$)

107

…

MEMORANDUM ITEMS

Nominal GDP (bn A$)

2,208

2,491

2,630

2,726

2,853

3,000

3,134

3,274

3,425

3,582

3,746

Percent change

11.6

12.8

5.6

3.67

4.7

5.1

4.5

4.6

Real GDP per capita (% change)

5.1

2.6

-0.3

-0.9

0.6

0.9

1.0

1.1

Population (million)

25.8

26.3

27.0

27.4

27.7

28.1

28.4

28.8

29.1

29.5

29.8

Nominal effective exchange rate

90.8

90.3

88.1

89.0

…

Real effective exchange rate

90.5

91.1

90.4

82.0

…

Sources: Authorities' data; IMF World Economic Outlook database; and IMF staff estimates and projections.

1/ Includes changes in inventories.

2/ Reflects the national accounts measure of household debt, including to the financial sector, state and federal governments and foreign overseas

banks and governments. It also includes other accounts payable to these sectors and a range of other smaller entities including pension funds.

3/ Fiscal year ending June.

[1] Under Article IV of the IMF's Articles of Agreement, the IMF holds bilateral discussions with members, usually every year. A staff team visits the country, collects economic and financial information, and discusses with officials the country's economic developments and policies. On return to headquarters, the staff prepares a report, which forms the basis for discussion by the Executive Board.

[2] At the conclusion of the discussion, the Managing Director, as Chair of the Board, summarizes the views of Executive Directors, and this summary is transmitted to the country's authorities. An explanation of any qualifiers used in summings up can be found here: http://www.IMF.org/external/np/sec/misc/qualifiers.htm .

https://www.imf.org/en/news/articles/2026/02/12/pr-26046-australia-imf-executive-board-concludes-2026-article-iv-consultation

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