OECD WARNS ON BUDGET, TAX; NEW US ENVOY
OECD urges action on budget deficit, NDIS spending
Global agency, the Organisation for Economic Cooperation and Development has delivered a sharp warning to the Albanese Government to tackle its budget deficits, sharpen the efficiency of the tax system and lift economic competitiveness. In its dedicated Economic Survey on Australia, the OECD said domestic reform was needed to raise productivity growth, improve housing affordability and facilitate the energy transition. The OECD said that spending growth in the $52 billion National Disability Insurance Scheme needed to be restrained more efficiently, including better control of access to support. In addition, the OECD report called on Australia to rebalance its tax system away from labour taxes by raising the (10 per cent) rate of the Goods and Services Tax, as well as by making greater use of property and environmental taxes.
IMF warns on persistent higher inflation in Australia
Meanwhile, the International Monetary Fund (IMF) says Australia may endure “drawn-out persistence” in an above-target level of inflation in 2026. The IMF’s World Economic Outlook reported that both Australia and Norway would continue to fight higher inflation, amid a decline in the global inflation rate from 4.1 per cent in 2025 to 3.8 per cent this calendar year. Earlier in January, the Australian Bureau of Statistics recorded a fall in the monthly Consumer Price Index to 3.4 per cent in the 12 months to November. Australia’s real (inflation-adjusted) GDP growth would be 2.1 per cent in 2026, the IMF forecasted. In its report, the IMF also warned that prices for energy commodities – a key Australian export staple - would fall by about seven per cent in 2026.
Defence Secretary appointed Ambassador to the US
Prime Minister Anthony Albanese has announced that the Secretary of the Department of Defence, Greg Moriarty, would be appointed as Australia’s next Ambassador to the United States. The PM and Foreign Minister Penny Wong said that Mr Moriarty was “uniquely experienced” to take forward the Australia-US alliance, citing his service in the headquarters of the US Central Command during military operations in the Persian Gulf. In addition, Mr Moriarty served as Ambassador to Indonesia from 2010 to 2014, and as Ambassador to Iran from 2005 to 2008. He also had held senior positions in the Office of the Prime Minister, including as International and National Security Adviser. Mr Moriarty was appointed Secretary of the Department of Defence in 2017; he will replace former PM Kevin Rudd as Ambassador to the US.
US lifts bar on allies’ defence spending
US War Secretary Pete Hegseth has called on US allies and partners to lift their total defence spending to five per cent of gross domestic product. Mr Hegseth released the Department of War’s 2026 National Defense Strategy, which said President Trump had set a new global standard for defence spending, comprising 3.5 per cent of GDP on core military spending and an additional 1.5 per cent on security-related spending. The National Defense Strategy said that the US would advocate that its allies and partners meet this standard around the world, not just in Europe. It said for too long, allies and partners had been content to let the US subsidise their defence.
Jobless rate, underemployment slide in December
Australia’s monthly level of unemployment fell from 4.3 per cent to 4.1 per cent, seasonally adjusted, in December, with a jump in both full-time and part-time employment. Figures from the Australian Bureau of Statistics also show that the monthly rate of underemployment – measuring those who want to work more hours – fell sharply, from 6.2 per cent in November to 5.7 per cent in December. Across the nation, however, the unemployment rate varied widely, from 3.5 per cent in the Australian Capital Territory to 4.6 per cent in Victoria; only Victoria and Tasmania (4.5 per cent) registered a jobless rate above four per cent.
PC inquiry into imported fabricated structural steel products
Federal Treasurer Jim Chalmers has ordered an inquiry into the potential imposition of safeguard measures against a range of fabricated structural steel products imported into Australia. The Productivity Commission will determine whether such measures are justified under World Trade Organisation rules, on the basis of there being a surge of imports that causes, or threatens to cause, serious injury to a domestic industry. The Australian Steel Institute sought the inquiry, which will assess the importation of a host of fabricated structural steel products used across the building and construction industries.