Key statistics

• GDP – Real GDP will expand by 1.75% in 2023-24. Growth is predicted to continue low, at 2% in 2024-25 and 2.25% in 2025-26.
• Inflation – The government anticipates inflation to remain within the target range until the end of 2024. The RBA’s most current forecast is that inflation would not return to the target range of 2-3% until the second half of 2025, and then to the midpoint in 2026. Global inflation is high, and it is not likely to revert to central bank objectives until 2025.
• Unemployment – The unemployment rate is around a 50-year low of 3.8%, while participation is near a record high of 66.6%. Unemployment is anticipated to increase but stay below pre-pandemic levels.
• Salaries – Nominal salaries have increased at the quickest pace in almost 15 years from 2023 to 2024. It is predicted to fall to 3.25% between 2024-5 and 2025-6. Real salaries are predicted to increase by 0.5% in the year to June quarter 2024.
• Business investment grew by 8.3% last year. 

The first four years of this decade have taxed the economy and all Australians’ resilience: floods and bushfires, a once-in-a-century worldwide pandemic, and the most major international energy crisis in 50 years. The cumulative effect of these events has economic implications for supply chains, energy prices, inflation, and interest rates. These events may seem like distant memories, yet their influence on the economy is being felt today.

Australia continues to experience global instability as a result of sustained inflation in North America, slowing growth in China and other major economies, the United Kingdom and Japan both concluding the year in recession, and escalating tensions in the Middle East and Eastern Europe.

Inflation and Cash Rate

Inflation is reducing but remains high in comparison to monetary policy’s target range of 2 to 3%.

According to Michelle Marquardt, ABS head of pricing data, the annual CPI increased by 3.6% to the March 2024 quarter. While prices for most products and services continued to grow, annual CPI inflation fell from 4.1% previous quarter to 7.8% in December 2022.

Inflation has driven up the cost of living in Australia, with people paying more for the same products and services.

The surplus in 2022-23 reduced inflationary pressures, enabling the government to finance priorities, and cut debt interest. All of these are good indications, but the government admits that inflation must be reduced much more and quicker. The budgetary initiatives aim to reduce rather than increase inflation.

The cash rate is now 4.35%; the RBA increased it by 0.25% on November 7, 2023, to bring inflation to the target range in a reasonable period. Goods prices are decreasing, while services remain high. Overall, rising interest rates have caused individuals to cut down on spending. This slows economic growth and puts demand in better harmony with supply.