In its annual assessment of the Australian economy on Thursday, the influential Washington-based body gave Labor and the Reserve Bank the tick of approval for economic performance, saying the nation was successfully managing a soft landing amid global uncertainty.
Inflation was down, the labour market was strong and growth was proving resilient.
The IMF applauded the federal government's nascent efforts to boost Australia's particularly weak productivity, repair the budget bottom line and ensure economic resilience.
But deeper reforms were needed to improve living standards and mend intergenerational inequity, the fund said.
Suggestions included bringing back the mining tax and raising indirect taxes like the GST.
The extra revenue could then be used to cut company and personal income taxes.
"An increase in indirect taxation, the reintroduction of a resource revenue tax, and removing income tax exemptions could offset lower corporate and labour taxes, thereby lowering the cost of capital and increasing incentives for investment and work," it said.
Runaway spending in programs such as aged care and the $52 billion NDIS should be curtailed, while productive infrastructure investment should be maintained.
Budget disparities had widened between states and territories due to increased infrastructure, health and social protection spending, as well as uneven commodity revenues, heightening the need for the Commonwealth to co-ordinate areas like climate change and tax reform.
For example, shifting away from stamp duty to recurring property taxes would promote more efficient use of land and go some way to solving the housing crisis, the IMF said.
Meanwhile, savings from tax arrangements that affect housing demand and investment, potentially by scaling back negative gearing and the capital gains tax discount, could be redirected toward building more homes.
Treasurer Jim Chalmers called the IMF report a powerful endorsement of Labor's responsible economic and fiscal management, but wouldn't be drawn on whether he would support any of the body's recommendations.
"We don't agree with all of the proposals put forward in the IMF report, around the GST or some of these other tax matters," he told Sky News.
"We are introducing a standard deduction to provide a little bit more relief, but also to simplify the system. We are reforming the tax system when it comes to incentivising more rental properties. We're reforming a tax system when it comes to critical minerals and hydrogen.
"So we are engaged in a lot of tax reform already. The primary purpose of that is to cut income taxes three times."
The IMF also urged the Reserve Bank to hold off on further rate cuts, if upcoming data continues to indicate tightness in the economy.
But if the data showed faster-than-expected softening, more cuts could be warranted, it said.
It also welcomed the central bank's efforts to increase transparency since its recent review, and urged the government to repeal the treasurer's power to override the RBA, which was recommended by the review but never implemented.
Australian businesses are starting to feel more upbeat, according to a survey of 1000 small and medium-sized business owners conducted by SME lender Judo Bank.
Almost seven in 10 SMEs feel confident about business growth in the next year, while there was a seven per cent jump in employers reporting strong health in their business compared to the last survey in February.
"We continue to see the resilience of Australia's small business sector, particularly among younger entrepreneurs, who demonstrate remarkable confidence despite ongoing economic challenges," Judo Bank chief customer officer Frank Versace said.
Business owners still said productivity growth was being inhibited by onerous red tape, although younger entrepreneurs were more focused on adopting new technologies, such as AI, to unlock their growth potential, Mr Versace said.
