In the year to date, Australia has faced a challenging set of economic conditions. At the moment, the economy is relatively soft, as the Reserve Bank of Australia (RBA) remains focused on reducing inflation and wage growth.
“That process does look like it’s working – inflation has come down,” says Macquarie Group’s Chief Economist, Ric Deverell.
For the Australian economy, there are two important variables for the months ahead: inflation and the labour market.
1. Taming inflation
The RBA will need inflation to move closer to its target range of 2-3% before it can comfortably start cutting the cash rate. As it stands, the cash rate is at its highest since November 2011.
It’s important to know that in the months ahead, with inflation being a key driver of the RBA’s decision making, further cash rate rises can’t be entirely ruled out.
Overseas, central banks have begun easing. The European Central Bank (ECB) began lowering its cash rate in June with a 25 basis point cut. On the other side of the Atlantic, the Bank of Canada also announced a 25 basis point cut.
The action taken by these two banks suggests that globally, the worst of the recent economic slowdown has passed, Deverell says.
“That will mean that a headwind that we’re facing at the moment, by 2025 will turn into a tailwind,” he says.
2. Eyes on unemployment
As Australian business leaders and owners are well aware, the Australian labour market has been tight in recent years, with attracting and retaining talent being a core business challenge.
However, unemployment has increased in the past year. A material increase in unemployment could bring the RBA into play as well, says Deverell, and it’s one of the key variables to watch carefully as the year progresses.
In its May statement on monetary policy, the RBA noted that unemployment is expected to continue climbing until the middle of 2025.
Looking ahead
Despite current conditions in the Australian economy, the groundwork for a recovery and a stronger year ahead has been laid.
“The Australian economy has had a difficult period. We had too much inflation, central banks had to tighten policy. That has slowed growth down and there’s no doubt that people are feeling a lot of pain,” Deverell says.
“I do think that slower growth is allowing wages to come into line with what we need for the central bank’s inflation targets. So I think the worst is probably behind us” he says. “I do think you can look forward to a better year next year,” he says. Source: Macquarie Bank
“My guess is that the worst is probably happening about now. I think that as the tax cuts roll in in the second half of the year, growth will start picking up again and 2025 will feel much better than 2024.
Industry Insider Property is independent & committed to helping buyers & sellers achieve their desired outcomes. Our experienced buyer agents and advisors will guide, execute, and deliver the best possible results to our clients. That’s why we have over 282 5-star Reviews on Google!
Our team will help you save time and share over 40 years of industry knowledge and expertise to ensure you make a wise, well-informed decision.
Contact us today via phone at +61 8374 7652, or email us at admin@industryinsider.com.au, or text message at +61 402 346 810 to learn more about our services and how we can help you buy or sell.
Follow us on social media for more insights.
Visit our Instagram Page here
Visit our TikTok Page here
Industry Insider Property
Level 3, 489 Toorak Road, Toorak 3142
+61 8374 7652
+61 402 346 810
industryinsider.com.au
