The Australian economy will be flat or see a small decline in 2025
This will be because of the high rate of business closures and job losses starting to flow through to the jobs rate and pushing it higher. This will also impact income tax revenue take for the incumbent Federal government. The Federal government has been reliant on record high income tax to fund their budgets, as the tax take has been pushed to record highs as a result of the low unemployment rate from COVID.
This in my opinion, is why the RBA has been prepared to have inflation higher for longer as they have been more concerned with holding on to the low unemployment rate and job gains, rather than, stamping out inflation and going harder on interest rates. Hence the higher cost of living environment we are currently in.
Costs will still be higher even if interest rates are cut, due to the low FX rate with the AUD currently at 61-63 US cents and most likely will fall further as the Australian economy struggles to grow in 2025 and the US economy strengthens and the USD along with it.
The RBA could find itself in a position where it wants to cut rates, but this will cause the AUD to fall and inflation to increase, as the cost of all our imports increase when the AUD falls.
Australia will be collateral damage in Trump tariff/trade war if it does escalate globally, which is look more likely by the day currently. I don’t believe we will be directly impacted by increased tariffs from the Trump Administration, but we will be caught up in retaliations efforts by other trading partners that are directly affected by tariffs.
Other contributing factors to a low or flat economic growth are low household savings ratios, low household consumption levels, and shortage of labour in the construction sector.
The last 15-20 years has seen extraordinary growth in the public sector with this the main driver behind jobs creation and wage growth. This has been on the back of expansionary fiscal policy by both sides of Government over this time period. But given the large amount of debt held a state and federal levels of government. This cannot continue and I see the public jobs sector shrinking over the next decade as governments at all levels struggle…
