Growth

The Australian economy is expected to avoid recession, but slow to just 1.2% growth in 2024
Consumer spending will be tepid given intense cost-of-living pressures, but aggregate household spending is supported by strong population growth and a robust financial sector
A modest recovery toward trend is forecast moving through 2025 as inflation and interest rate pressures ease and the government delivers tax and cost-of-living support to households

Inflation

Inflation has slowed significantly since its peaks but remains too high for the Reserve Bank of Australia to consider rate cuts
Nominal unit labour costs have remained stubbornly high, but are likely to ease from the second half of the year
Wage growth has peaked and will slow further as capacity constraints in the labour market ease, while a modest recovery in trend productivity is likely as the economy improves over the coming year
Slowing growth in unit labour costs, combined with lower prices of imports, should see core inflation ease back within the RBA’s target range by the middle of 2025

At 4.35%, interest rates are in restrictive territory, though less so than global counterparts
A rise in unemployment, combined with a slowing in inflation towards target, should allow the RBA to commence a modest easing cycle from early 2025
The easing cycle in Australia will be modest compared to developed market economies