This Survey is published on the responsibility of the Economic and Development Review Committee of the OECD, which is charged with the examination of the economic situation of member countries.

The economy is slowing amid tightening financial conditions, following a rapid post-pandemic recovery. To bring inflation down, monetary policy will need to remain restrictive and further windfall government revenues from elevated commodity prices saved.

The economy rebounded robustly in the wake of the pandemic, but inflation rose rapidly amid supply constraints and rising global energy prices, leading to a substantial tightening in monetary policy. The public finances have also recovered quickly, but deficits are anticipated to re-emerge in the coming years and there are longer-term fiscal pressures on the horizon related to an ageing population. In response, tax and spending reforms that promote fiscal sustainability are a priority. As the population ages and the economy is shaped by global forces including the climate transition and digitalisation, policies must continue to promote an adaptable labour force and business sector. Reforms in the areas of immigration, education and the regulatory environment will be particularly important.

Gender inequalities have steadily declined, but remain particularly visible in the labour market. Australian women have lower employment rates, hourly wages and hours worked than their male counterparts. Childbirth is particularly disruptive for the labour market experience of women in Australia. Reforms to the tax and benefits system, childcare and parental leave arrangements are all needed to reduce the barriers to female labour participation of mothers. At the same time, ensuring the adequacy of unemployment benefits will support the living standards of many low-income women given that they have become an increasing share of recipients. Single mothers face particularly high poverty risk and would also benefit from more robust arrangements around child support payments from non-custodial parents.

Australia has committed to achieving net zero greenhouse gas emissions by 2050 and more recently outlined a more ambitious intermediate target for emission reductions by 2030. However, achieving these targets will be challenging given a historical reliance on coal generation and the presence of significant mining and agriculture sectors. It will require a rapid transformation of the electricity grid, significant emissions reductions in highly-polluting sectors such as industry and agriculture, and sufficient offsets generated by “negative emissions” technologies and practices to counterbalance any emissions that cannot be fully eliminated. At the same time, Australia is particularly vulnerable to the physical impacts of climate change, as the driest inhabited continent on the planet with the majority of the population living on the coasts. Further significant reforms are required to meet the emission reduction goals, support the reallocation of workers and adapt to climate change.