Growth

The Australian economy is expected to avoid recession, but slow to just 1.3% growth in 2024
Consumer spending will be tepid given intense cost-of-living pressures, but this is mitigated by still-high levels of excess savings built up during COVID, 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

Headline inflation is slowing as traded goods prices ease and governments ramp up cost-of-living subsidies
Services inflation remains uncomfortably high and is likely to remain sticky in the short term due to strength in unit labour costs (rising wages and weak productivity) and tight rental markets
However, QIC expects inflation to ease back within the RBA’s target range in 2025 as capacity constraints ease

The RBA has raised rates from 0.1% to 4.35% over 18 months to November 2023 and needs to keep rates in restrictive territory in the near term
Slowing GDP growth and rising unemployment, combined with a slowing in inflation towards target, should allow the RBA to commence a modest easing cycle from late 2024