IMF projects 3.9% Australian inflation by end of 2026
- Sydney (15 April)
The International Monetary Fund (IMF) expects Australia’s inflation rate to reach 3.9% by December 2026, slightly above the Reserve Bank of Australia’s (RBA) February forecast, the agency said early on 15 April.
Australia’s unemployment rate will also remain stable at 4.2%, and its economy will grow by 2%, in real terms, over 2026, according to baseline IMF forecasts.
“Our [baseline] forecast assumes a short‑lived [Iran] conflict and a moderate 19% rise in energy prices in 2026,” IMF Research Director Pierre-Olivier Gourinchas said at a press conference.
The IMF expects Australia to be less severely impacted by the ongoing US-Israeli war in Iran than other nations.
It expects global inflation to hit 4.4% at the end of 2026, up from 4% at the end of 2025, under a baseline scenario. Real economic growth will also slow to 3.1% in 2026, from 3.4% in 2025, the agency said.
A prolonged war in Iran – extending into 2027 – could cause global growth to fall to 2% in 2026, with inflation exceeding 6%, Gourinchas said.
IMF’s inflation forecasts are higher than the RBA’s February forecasts, which the central bank published before the Iran war began on 28 February. RBA forecasted a 3.6% inflation rate for December 2026 in a Monetary Policy Statement on 2 February.
Australian businesses have faced increased costs since the Iran war began. Purchasing costs rose by 3% on a quarterly basis in March, up from 1.3% in February, according to NAB’s Monthly Business Survey. Diesel prices – which impact freight costs – also increased across every Australian state over the month.
Australia’s government is preparing for prolonged war-related disruptions. “This is a really dangerous time for the global economy. The [IMF] is expecting slower growth and higher inflation around the world. And we are as well,” Australian Treasurer Jim Chalmers said today, as he prepared to meet G20 Finance Ministers in Washington.
“Even when the Strait [of Hormuz] is properly opened, and even when the hostilities formally end in an enduring way, we still expect the consequences of the [Iran war] to be felt for some time,” he added.
Iran closed the Strait of Hormuz to most ships after the US and Israel attacked it in February, curbing global oil supplies. The US Navy has also blockaded all ships transiting through Iranian ports since 14 April.
Australia primarily buys refined oils from producers in Asian economies, including Singapore, Japan, South Korea, and Malaysia. Australian Prime Minister Anthony Albanese and Singaporean Prime Minister Lawrence Wong agreed to cooperate on fuel supply issues on 10 April.
Albanese is currently on a trip to Brunei and Malaysia, where he will discuss fuel, fertiliser, and critical goods cooperation with his counterparts.
By Avinash Govind