Australia faces its longest stretch of rubbish economic growth since the early 1990s recession, as inflation soars and long-term vulnerabilities catch up with the country.
Deloitte Access Economics said it expects the economy to slow sharply with GDP growth to fall below a miserable 2 per cent. Deloitte is normally a ‘happy clapper’ for market capitalism.
The slower growth will be accompanied by rising inflation which will hang around 4 per cent through 2026-27.
Mortgage repayments have climbed by $350 a month on an average home loan, due to the Reserve Bank’s three interest rate hikes this year.
Higher prices for rents, petrol, insurance, groceries and electricity, are hitting households.
Real wage growth will go backwards in 2026-27, while slower economic growth will mean unemployment, now at 4.4 per cent, may go close to 5 per cent next financial year.
In real terms, if you include people who have dropped out of the workforce and who are under-employed, that’s seven or eight percent. The ABS don’t tell you that.
For too long, strong population growth has masked weak underlying productivity and lifted aggregate growth while doing bugger all to improve living standards.
Years of poor investment in housing, infrastructure, energy and the economy’s productive capacity has come home to roost.
Deloitte is expecting the Reserve Bank to lift official interest rates in its August meeting, taking the cash rate to 4.6 per cent.
After being the nation’s strongest economy for several years, Western Australia is expected to be the slowest this financial year.
Deloitte is tipping WA growth to slow to 0.7 per cent, far behind the Northern Territory (5.9 per cent), NSW, South Australia and Victoria (all 1.3 per cent), Queensland (1.7 per cent), Tasmania (0.9 per cent) and the ACT (1.6 per cent).
The largest impact on the economy was the war against Iran. Financial markets are also heavily dependent on expected profits from the AI sector – good luck with that.
The surge in spending on power-hungry date centres and technology may lift productivity. Business investment is forecast to grow by 6.9 per cent this year and 5 per cent in 2027-28.
Confidence among shoppers collapsed at the start of the war against Iran, falling to the lowest levels on record.