Forecast for Global Growth and Economic Activity in Australia: A Detailed Analysis

Global growth is forecast to remain below historical averages over the next two years, with the effects of monetary policy tightening continuing to impact demand. The central forecast for growth in Australia’s major trading partners has been revised down, partly due to China’s weaker-than-expected post-COVID-19 recovery.

In Australia, economic activity is expected to remain subdued due to cost-of-living pressures and rising interest rates. However, growth is projected to gradually increase over the forecast period, supported by easing headwinds and a pick-up in household wealth. Despite tight labor market conditions, unemployment and underemployment rates are forecasted to increase in the coming years.

Inflation in Australia is expected to decline to around 3¼ per cent by the end of 2024 and return to the 2–3 per cent target range by late 2025. Goods prices are anticipated to continue declining, while electricity costs are expected to rise, and services inflation is forecasted to persist.

The forecasts are based on technical assumptions, including a peak cash rate of around 4¼ per cent by the end of 2023 before declining to 3¼ per cent by the end of 2025. The exchange rate is assumed to remain stable, and petrol prices are expected to stay around their June quarter average.

Overall, the outlook for economic growth, inflation, and labor market conditions in Australia remains uncertain, with various domestic uncertainties that could impact outcomes differently than forecasted. Key factors include the outlook for China, household consumption, inflation persistence, and potential declines in goods prices.

The news story highlights the challenges and opportunities facing Australia’s economy in the coming years, providing insights into the factors influencing growth, inflation, and employment prospects.