The Paris-based Organisation for Economic Co-operation and Development lifted its inflation forecasts for Australia in its September economic outlook, released on Tuesday.
But Australia's headline and core inflation figures are still expected to come in around the midpoint of the Reserve Bank of Australia's two to three per cent target band in 2025 and 2026.
Core inflation, which removes volatile items and is more closely watched by the Reserve Bank, is expected to fall from 3.7 per cent in 2024, to 2.7 per cent this year, before settling at 2.5 per cent in 2026.
That should give the RBA the green light to continue its gradual easing of interest rates, the OECD said in its report.
But the body warned US tariffs continued to cause uncertainty in the global economy and inflation surprises could trigger drastic financial market sell-offs.
"Central banks need to remain vigilant and attentive to shifts in the balance of risks around economic developments and financial markets in order to maintain price stability," it said.
"Provided inflation expectations remain well anchored, policy rate reductions should continue in economies in which underlying inflation is projected to moderate towards target."
In its latest economic outlook in August, RBA staff said it was more likely tariffs would result in lower inflation in Australia, as other countries redirect cheap goods from the US.
The RBA expects Australia's headline inflation rate to climb to three per cent by the end of 2025, as government energy rebates roll off, but core inflation should fall to about 2.6 per cent.
In a nod to Mr Trump's efforts to strongarm the Federal Reserve to lower rates, the OECD warned central bank independence was crucial for policymakers to "react quickly and credibly to shifts in the risks to price stability".
"These lower the volatility and persistence of inflation by helping to ensure that long-term inflation expectations remain well anchored," it said.
Treasurer Jim Chalmers said the report made clear that uncertainty and volatility were continuing to weigh on the global economic outlook.
"Amidst this intense global economic volatility and inflation rising in parts of the world, the Australian economy is in an enviable position," he said in a statement.
The OECD expected Australia's economic growth rate would accelerate from 1.1 per cent to 1.8 per cent in 2025 and 2.2 per cent in 2026, unchanged from its prediction in June.
"Under Labor, inflation is down, debt is down, real wages are growing, unemployment is low, interest rates are falling, and economic growth is picking up," Dr Chalmers said.
Similar developed economies were faring less favourably, with Canada's GDP expected to grow 1.1 per cent in 2025, the UK 1.4 per cent and Europe 1.2 per cent.
While slow productivity growth was an issue across the globe, the OECD said AI could boost productivity and living standards, although significant uncertainty remained around the speed of adoption.
A "faster AI adoption" scenario, in which adoption rates were similar to those seen for mobile phones, could raise average annual GDP growth by 0.4 percentage points in advanced G20 economies such as Australia.Â
