Good news for your wallet: A positive growth trend in Australia’s economy

Over the years, the Australian economy experienced its fair share of economic ups and downs, including the inflation battles of the ’70s and ’80s, the recession in the early ’90s, and the Global Financial Crisis that shook the world in 2008.

But as we look ahead, there is a glimmer of hope on the horizon for everyone’s wallets and the national economy.

Recent reports suggest that the economy is on the cusp of a turning point, with improving household budgets set to drive growth in the coming years.

Deloitte, in their latest Business Outlook Report, has painted a picture of an economy that has passed its ‘low point’ and is now ‘grinding higher.’

However, Stephen Smith, Deloitte Access Economics partner and report lead author noted that while things are improving, ‘that is not to say things are really rosy and will bounce back quickly.’

‘We see a really slow grind in terms of slightly strengthening growth through 2025 and 2026.’

The September quarter saw the economy grow by a modest 0.3 per cent, with a yearly growth rate of 0.8 per cent. This is the slowest pace since the 1980s, excluding the pandemic period.

However, economists are optimistic that growth will pick up slightly in the December quarter and beyond.

Local households are likely to have more disposable income.

One of the key drivers of this anticipated growth is consumer spending. As wages are expected to rise and interest rates fall, local households should find themselves with more disposable income.

Deloitte Access Economics predicts that the Reserve Bank will ‘cut the cash rate’ by a total of 150 basis points over the next two years, 75 points through this year and another 75 points in 2026.

‘By the end of the rate cutting cycle, a household with an average sized mortgage and a variable mortgage rate would be around $8,000 better off in today’s dollars,’ per Deloitte’s report.

In addition to lower interest rates, households are also likely to benefit from modest real wage gains, government spending, and the extension of cost-of-living rebates. These financial boosts could see household consumption accelerate in 2025 and 2026, although it may take until later in the decade for spending to return to pre-pandemic levels when adjusted for inflation and population growth.

Treasurer Jim Chalmers has welcomed the Deloitte report, saying, ‘Inflation is down, wages are up, unemployment is low, we’ve overseen the creation of more than 1.1 million jobs and as a result Deloitte expects growth in Australia to pick up this year.’

He also points to progress in managing the budget and reducing debt as signs that the country is on track for a ‘soft landing.’

Experts suggest that reforms are needed to sustain the predicted growth trend.

However, Deloitte’s report and industry experts agree that meaningful reforms are still needed to ensure sustainable economic growth.

‘The biggest one that should happen is tax reform. We have been in a position where there hasn’t been any significant tax reform since the GST was introduced,’ explained Smith.

‘As spending continues to rise on programs that are very worthy causes, revenue will have to rise as well so we will all be paying more taxes in the future than we are today.’

He added that productivity is another area where the country desperately needs a boost. Recent reforms in aged care and the establishment of a National Productivity Fund are steps in the right direction, but more is needed to drive the engine of prosperity.

‘However, more generally, there has been a lack of substantive economic reform in Australia over a period stretching more than two decades. This is a problem because productivity is the key engine of prosperity,’ he continued.

In agreement, Chalmers said, ‘We have made this progress together in the economy and the budget at the same time as keeping the reform wheels turning, including with our five pillar productivity agenda to make our economy more competitive, resilient and dynamic.’

What do you think about the predicted economic growth in the country? Are you feeling optimistic about your financial future? Share your thoughts and experiences with us in the comments below.

Also read: How shifts in the global economy could affect the Australian dollar

Floralyn Teodoro
Floralyn Teodoro
Floralyn covers different topics such as health, lifestyle, and home improvement, among many others. She is also passionate about travel and mindful living.

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