The Economic Outlook For 2025 in Australia

STAFFORD, Australia - Jan. 16, 2025 - PRLog -- As the new year begins, let's have a look at what we can expect when it comes to interest rates and cost of living within Australia.

Where to now with interest rates?

At the last Reserve Bank Board (RBA) meeting, RBA governor Michele Bullock recognised the easing of headline inflation from 5.4% to 2.8% over the year to September 2024 but suggested that the economy still has some way to go before inflation is sustainably within the 2% to 3% target range. The RBA appears wary of volatility and wants to see inflation sustainably trending down before making any move. Commbank is predicting a February 2025 rate cut, ANZ and Westpac May 2025, and NAB June 2025. But, with the Australian dollar dropping off the back of a potential US trade war with China, interest rate cuts might be some way off. Official interest rates are currently 4.35%. The RBA meets again on 17 Feb 2024 with the next update on 18 Feb 2024.

Cost of living pressures

The National Accounts released in early December took economists by surprise with living standards growing by a mere 0.2% in the September quarter – the expectation was much higher. Discretionary spending only increased by 0.1%.

The personal income tax cuts that came into effect from 1 July 2024 helped households, as did energy subsidies, but the impact is still working its way through the system. At the same time, mortgage costs continue to rise as past increases continue to impact. Through the year, Australia's economy grew 0.8%, the lowest rate since the COVID-19 affected December quarter 2020. Economic activity in the Australian economy right now is heavily dependent on Government spending. Slow and steady is the expectation for 2025.

For more information, speak to our experienced team of accountants in Stafford, Queensland or visit https://mcfillin.com.au/.