Economic Outlook and Forecasts for Australia: Growth, Inflation, and Uncertainties
The global economic outlook remains subdued, with growth forecasted to remain below historical averages over the next two years. In Australia, economic activity is expected to slow due to higher interest rates, increased cost of living, and declines in household wealth. The labor market remains tight, with solid employment growth, but the unemployment rate is forecasted to rise in the coming years.
Inflation in Australia has peaked, with goods prices driving most of the disinflation. Energy and services inflation remain strong, but overall inflation is expected to decline to around the top of the target range over the next few years. The outlook for inflation is similar to previous forecasts, with some shifts in composition.
The forecast for GDP growth in Australia is expected to slow to around 1ΒΌ per cent in 2023, with household consumption growth remaining sluggish. However, a gradual increase in consumption is expected over the forecast period as monetary policy tightens and household wealth recovers.
The outlook for private investment has softened, with residential and non-residential construction projects supporting activity. Public demand is expected to remain high, with public investment growing over the forecast period. Education and travel exports are expected to continue to recover, driving export volumes.
The unemployment rate is expected to increase as economic growth slows, with labor cost growth remaining solid. Key uncertainties include global financial instability, competing forces affecting household consumption, and the potential for inflation to be more persistent than expected.
Overall, the economic outlook for Australia is cautious, with uncertainties surrounding key economic indicators. The forecasts are based on technical assumptions and may be subject to change based on evolving economic conditions.