IMF urges sweeping tax reform as Australia’s debt climbs past $1 trillion

The IMF has warned that Australia needs a sweeping tax overhaul to stabilise surging public debt, which is projected to exceed $1 trillion at the federal level alongside fast-rising state liabilities.

In its annual review, the Fund called for reintroducing a mining tax, lifting the GST tax rate (GST is an Australian VAT), removing selected income-tax exemptions, and shifting state taxes away from stamp duty toward broad-based recurring property taxes. It said these reforms are necessary to offset weakening income and corporate-tax revenue and to support long-term fiscal sustainability.

The IMF also urged tighter spending control, particularly in the NDIS and aged care, and advocated for a nationally coordinated fiscal strategy to manage state debt tied to infrastructure, health and social-sector outlays.

Despite these pressures, the IMF said Australia is achieving a post-Covid “soft landing”, with growth forecast to rise from 1.8% in 2025 to 2.1% in 2026. But it cautioned that global uncertainty — including potential fallout from President Trump’s tariff policies — risks weakening demand, delaying recovery in private spending and lifting unemployment.

This article was written by Eamonn Sheridan at investinglive.com.