The news: The Organisation for Economic Co-operation and Development (OECD) warned that Australia’s national debt is set to rise rapidly unless the government creates significant fiscal adjustments.
The context: In its 2026 Australian Economic Survey, an annual assessment of Australia’s economy and fiscal positions, the OECD declared that “spfinishing pressures have been strong” and are a concern across both federal and state budreceives.
It declared that “with federal and state budreceives projected to be in deficit for years to come and growing fiscal pressures coming from population ageing and the climate transition, there should be a greater sense of urgency about improving the public finances”
The federal government should implement its plan to narrow the deficit steadily so as to put the debt-to-GDP ratio on a stable or downward path, the OECD declared, warning that without a alter the debt-to-GDP ratio would be put on a “steep upward path”.
The OECD added that while most of the challenges in the Australian tax system and potential solutions have long been identified, notably in the 2009 Henry review, many recommfinishations were never implemented. It suggested that current circumstances may be more favourable to building progress on improving the “economic efficiency, equity and revenue-raising potential of the Australian tax system” and recommfinished that Australia consider commissioning a new review to provide updated expert advice on the options to reform the tax system.
The report declared that reforming property taxes would support to dampen property prices, noting that a shift from transaction taxes – such as stamp duty – toward recurrent taxes, would support cool home-price growth.
The OECD added that the tax system should be rebalanced away from income taxes by raising GST and building greater apply of property and environmental taxes.
Despite the RBA last month indicating that further rate-cuts are unlikely, the OECD declared that given the gradually softening labour market and cooling inflation, “evidence suggests that policy settings could be eased modestly further in 2026, consistent with achieving a broadly neutral stance if conditions evolve as projected.”
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