Organisation for Economic Co-operation and Development urges Reserve Bank of ... trends now
The Organisation for Economic Co-operation and Development has urged the Reserve Bank to keep interest rates higher for longer to help tame inflation.
In its latest Economic Outlook, released on Thursday evening, the Paris-based thinktank, led by former Australian federal finance minister Mathias Cormann called for measures to ease inflationary pressures, slash Australia's structural deficit, and bolster anaemic productivity growth.
While the OECD expects inflation, currently at 3.6 per cent, to continue easing, it anticipates prices for some services to remain elevated, necessitating a delay to interest rate relief.
The report has predicted three rate cuts between the September quarter and the end of 2025.
'Monetary policy should remain restrictive in the short term to tame inflation,' the OECD report stated.
The OECD, led by former Coalition finance minister Mathias Cormann, called for changes to future-proof Australia's economy
However, should the economy prove more resilient, and cause services inflation to remain persistent, the OECD cautioned that Australia's central bank could additionally be forced to resume its aggressive run of rate hikes.
'A downside risk to economic growth is that taming stubborn services inflation may require tighter monetary policy than currently assumed,' it said.
According to the OECD forecasts, Australia's real GDP growth is projected to slow to 1.5 per cent through 2024 before recovering to 2.2 per cent in 2025, as the impact of the RBA's aggressive run of rate hikes crimps household consumption and business activity.
At the same time, the jobless rate is projected to increase to 4.3 per cent, up from its current rate of 3.8 per cent, helping to reduce inflationary pressures from labour-intensive services sectors.
Urging the government to trim Australia's structural budget deficit, which has been buoyed by soaring income and company tax collections for the past
