IMF urges Australian government to cut spending as another interest rate hike looms

The IMF’s new assessment will come as a blow to the treasurer of Australia, Jim Chalmers, who is under pressure to present a convincing story of improving the economy and living standards. Photograph: Lukas Coch/AAP

The International Monetary Fund has called on Australia’s federal and state governments to cut spending as it warns the Reserve Bank may have to hike interest rates further to get price pressures back under control.

More disciplined budgets would rein in rising debt burdens and help solve Australia’s long-running inflation problem, the IMF said in a new report, as it downgraded its forecast for Australia’s economic growth in 2027.