The International Monetary Fund \u2014 the body which bails out countries in crisis \u2014 wants Australia to strengthen its national balance sheet by increasing the GST, bringing back the mining tax and implementing cuts to the NDIS.<\/p>\n
The IMF also warned mortgage debt is getting out of control, made worse by a chronic housing shortage.<\/p>\n
With government spending at the highest level since 1986, outside of the pandemic, the IMF said boosting weak economic growth would require \u201ccomprehensive tax reform and greater spending efficiency\u201d.<\/p>\n
Sign up to The Nightly’s newsletters.<\/p>\n
Get the first look at the digital newspaper, curated daily stories and breaking headlines delivered to your inbox.<\/p>\n
By continuing you agree to our Terms<\/a> and Privacy Policy<\/a>.<\/p>\n The recommendations include raising the Goods and Services Tax from 10 per cent, a level that hasn\u2019t changed since its debut in 2000 and which has left it as one of the world\u2019s lowest. New Zealand\u2019s rate is 15 per cent.<\/p>\n The IMF called for the reintroduction of the mining tax scrapped in 2014. Then Liberal prime minister Tony Abbott had earlier won a landslide election victory campaigning against the Labor Party\u2019s Mineral Resources Rent Tax introduced by Prime Minister Julia Gillard.<\/p>\n The Washington-based organisation argued a higher GST and a revived mining tax could fund income tax cuts as well as a reduction in the 30 per cent tax rate for big business.<\/p>\n \u201cAn increase in indirect taxation, the reintroduction of a resource revenue tax, and removing income tax exemptions could offset lower corporate and labour taxes, thereby lowering the cost of capital and increasing incentives for investment and work,\u201d the IMF said.<\/p>\n The IMF\u2019s mission statement on Australia also recommended pruning the NDIS, even though Prime Minister Anthony Albanese\u2019s government is already moving to remove autistic children from the program.<\/p>\n \u201cExpenditure reforms should continue to target efficiency savings in growing cost areas (such as NDIS and aged care), and protect productive infrastructure investment,\u201d it said.<\/p>\n Australia delivered a $10 billion deficit for 2024-25, which was $17.6 billion better than forecast in the pre-election March Budget, as iron ore prices held up instead of plunging.<\/p>\n But government spending made up 26.2 per cent of gross domestic product, which outside of COVID, was the highest since 1986.<\/p>\n \u201cThe Commonwealth\u2019s fiscal strategy has been effective over the post-pandemic period, but if structural spending pressures intensify in the future, clearer fiscal anchors could help to safeguard fiscal sustainability,\u201d the IMF said.<\/p>\n Nonetheless, Treasurer Jim Chalmers seized on the report praising Australia for \u201cmanaging a soft landing amid global uncertainty\u201d.<\/p>\n \u201cThe International Monetary Fund has today backed Australia\u2019s budget and fiscal strategy at a time of global uncertainty,\u201d he said.<\/p>\n Mortgage debt warning<\/p>\n The IMF also noted recent Reserve Bank of Australia rate cuts were turbocharging the housing market, and called for a review of the existing mortgage stress test requiring lenders to assess a potential borrower\u2019s ability to cope with a three-percentage point increase in variable mortgage rates.<\/p>\n House prices are already growing at a faster pace since the October 1 introduction of the 5 per cent Deposit Scheme for all first-home buyers without income limits.<\/p>\n \u201cAs financial conditions ease and housing prices rebound – further stretching valuations against income – vulnerabilities may arise from potential weakening in lending standards and excessive build-up of household debt,\u201d it said.<\/p>\n \u201cWhile current macroprudential policies support stability, regulators must stay vigilant and be prepared to tighten measures, such as pre-emptively activating additional borrower-based limits, in response to evolving vulnerabilities.\u201d<\/p>\n The inability of builders to keep pace with immigration-fuelled population growth has also sparked a warning about Australia\u2019s housing shortage, blaming local councils for holding up planning approvals. More than 300,000 migrants, on a net basis, are moving to Australia every year, down from record-high levels of 550,000 in 2023 but still above pre-pandemic levels of 200,000.<\/p>\n \u201cAlthough cyclical pressures have eased somewhat, as population growth slowed and dwelling investment picked up, Australia\u2019s housing imbalance persists due to long-standing challenges including some skilled labour shortages, expensive land, low construction productivity, and complex regulations and approval processes,\u201d it said.<\/p>\n The IMF also called for state-based stamp duties to be replaced with an annual land tax and questioned the wisdom of the Federal Government\u2019s 50 per cent capital gains tax discount allowing property investors to only have to declare half the price rise on their tax return.<\/p>\n \u201cAs part of a comprehensive tax reform, a shift away from stamp duties to recurring property taxes at the state and territory government level can be considered to promote more efficient use of land and existing housing stock, and tax arrangements that affect housing demand and investment can be reviewed with potential savings redirected toward supporting new housing supply,\u201d it said.<\/p>\n State of finances<\/p>\n The Federal Government maintains a AAA credit rating, but not all the states have that score, making it harder for them to borrow more money without having to pay a higher interest bill to cope with an overseas and interstate population influx.<\/p>\n \u201cRising state and territory debt, driven by increased infrastructure, health and social protection spending and exacerbated by uneven commodity revenues, has caused missed sub-national fiscal targets and widening disparities,\u201d the IMF said.<\/p>\n \u201cFiscal coordination across the federation is crucial to ensure equitable burden\u2011sharing and efficient spending, especially in areas like climate governance and tax reform.\u201d<\/p>\n Economic growth across Australia was uneven in 2024-25 with new government data showing Queensland had gross state product (GSP) growth of 2.2 per cent. This was more double the pace during the last financial year of NSW, Victoria, South Australia and Tasmania. Even mining-rich Western Australia was relatively weak with growth of 1.3 per cent.<\/p>\n GSP per capita went backwards federally and in every state and territory except Queensland and Tasmania, and the Australian Capital Territory that benefits from a bigger public service.<\/p>\n Australia\u2019s chronically weak productivity growth during the past decade was also slammed, with the 0.2 per cent level recorded during the last financial year a far cry from the 2.1 per cent annual average pace from the 1990s to the mid-2000s.<\/p>\n \u201cWhile labour productivity growth has slowed across several advanced economies, Australia has experienced a particularly pronounced decline in labour productivity,\u201d the IMF said.<\/p>\n","protected":false},"excerpt":{"rendered":"The International Monetary Fund \u2014 the body which bails out countries in crisis \u2014 wants Australia to strengthen…\n","protected":false},"author":2,"featured_media":297079,"comment_status":"","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[11],"tags":[64,63,99,164,84],"class_list":{"0":"post-297078","1":"post","2":"type-post","3":"status-publish","4":"format-standard","5":"has-post-thumbnail","7":"category-economy","8":"tag-au","9":"tag-australia","10":"tag-business","11":"tag-economy","12":"tag-politics"},"_links":{"self":[{"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/posts\/297078","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/comments?post=297078"}],"version-history":[{"count":0,"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/posts\/297078\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/media\/297079"}],"wp:attachment":[{"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/media?parent=297078"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/categories?post=297078"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/tags?post=297078"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}