A global financial body has urged the federal government to implement tax reform as Australia's economy manages a "soft landing".
In its latest report, the International Monetary Fund (IMF) praised the handling of Australia's economy during difficult conditions as inflation pressures return.
"Executive directors welcomed Australia's progress toward a soft landing and internal balance," the report said.
"They commend Australia's robust institutions, flexible markets, agile policy toolkit and flexible exchange rate, which position the country to manage external risks from trade policy uncertainties and tighter global financial conditions."
The report came after an uptick in inflation, which led the Reserve Bank to hike interest rates.
IMF calls for tax changes
The IMF urged the federal government to find other methods to improve the fiscal situation.
"(Directors) encouraged comprehensive tax and expenditure reforms, while protecting and prioritising infrastructure investments to enhance productivity and support growth," the report said.
"Directors highlighted the need for a holistic strategy to address housing supply constraints, emphasising implementation of supply-boosting measures and tax reforms."
The fund also called for an increase in the 10 per cent rate of GST, lowering the company tax rate and increasing taxes on resources.
The tax changes expected in the 2026 federal budget
Treasurer Jim Chalmers is expected to announce a reduction of the 50 per cent concession for capital gains tax in the May federal budget.
However, the treasurer said the government had not changed plans on the tax discount.
"We know there are intergenerational issues in our economy and in our budget. We're dealing with them in other ways," he told ABC radio on Monday.
Dr Chalmers said the fund's report was an indication the federal budget was heading in the right direction despite global headwinds.
"The IMF's report shows that our economic agenda with cost-of-living relief, budget repair, and economic reform is the right approach," he said in a statement.
"The IMF has described the government's reform agenda as 'bold' and recognised our efforts across multiple fronts."
The report also called for better ties between the federal government and states and territories.
"Directors also recommended improved fiscal co-ordination across the federation and regular monitoring of sub-national fiscal positions," the report said.
Despite the praise in the fund's report, Dr Chalmers said more work needed to be done.
"There are some ideas in these reports that we agree with, some that we don't, that we won't be picking up and running with," Dr Chalmers told ABC radio.
"But overwhelmingly, this IMF report was a very positive report about Australia and about the government's economic plan.”
