IMF warns Australia faces 3.9% inflation rate

• The International Monetary Fund warned that Australia will face a 3.9% inflation rate this year, making it one of the highest among advanced economies.
• The Reserve Bank of Australia raised its cash rate to 4.6% and hinted at a further increase to 4.85% at its upcoming November meeting.
• High levels of public spending and rising domestic capacity pressures continue to drive underlying inflationary pressures across the nation.

The International Monetary Fund  warned that Australia faces a 3.9% headline inflation rate this year, prompting the Reserve Bank of Australia to signal a potential interest rate increase to 4.85% in November.

The forecast puts Australia's inflation rate above the RBA’s August expectation of 3.6% and ahead of peer economies like the United States at 3.6% and the United Kingdom at 3.3%.

"Given elevated debt, rising sovereign yields, and pressing spending needs, a renewed focus on rebuilding fiscal space is increasingly urgent," stated the IMF in its latest report.

The international body noted that Commonwealth Government spending currently accounts for 26.9% of gross domestic product, while 10-year bond yields reached a 15-year high.

The ongoing inflationary trend has flow-on effects across the Australian economy, where average mortgage debt for first-home buyers reached $743,000.

The RBA has already delivered four interest rate increases this year, lifting the cash rate from its previous level to a 15-year high.

At the same time, national unemployment rose to a five-year high of 4.6% as higher energy prices and domestic cost pressures continued to affect economic activity.