Australia Economic Outlook

Outlook Q4 2025

Australia's economy in the September quarter showed a notable improvement from earlier this year, with GDP rising 0.4%. The rebound was powered by strong private investment and household spending, while public sector demand also returned to support growth. However, inflation remains above the RBA's target. As global uncertainties persist, Australia's economic outlook is shaped by both domestic momentum and evolving international conditions.

Australian overview

The September quarter marked a turning point, with private sector activity leading the recovery.

GDP rose 0.4%

supported by a 2.9% surge in private investment and a 0.5% lift in household consumption.
Public spending rebounded

with government consumption and investment both outpacing GDP growth.
Inflation jumped above target

but KPMG believes the RBA should adopt a sit-and-wait approach as price pressures appear to be driven by transitory cost spikes.
The labour market remains robust

with unemployment steady at 4.3% and wages growth holding firm.
Business investment in data centres and air transport reached record highs

while housing investment and approvals continued to recover.

Global landscape

The global economy showed resilience in 2025, buoyed by strong AI-related investment and accommodative policy settings.

Global growth is expected to slow through 2025 and into early 2026

as higher tariffs and ongoing policy uncertainty weigh on activity. However, a gradual recovery is anticipated later in 2026 and into 2027, supported by the fading impact of trade barriers and continued favourable financial conditions.
Trade volumes and tech-driven exports supported activity

but policy uncertainty and supply chain vulnerabilities continue to weigh on sentiment.
Financial markets have seen strong equity gains

especially in the US and Asia, while gold prices surged amid geopolitical tensions.
Inflation trends diverged across regions

prompting central banks to take varied policy paths.

Summary forecast

* Values at end of period
# Actual values
^ Forecast values

KPMG forecasts of key macroeconomic indicators

Indicator	2024 (actual)	2025 (forecast)	2026 (forecast)	2027 (forecast)
Real GDP (average annual growth)	1.0%	1.9%	2.1%	2.0%
Real GDP (year-ended growth)	1.3%	2.0%	2.0%	2.0%
RBA cash rate	4.35%	3.60%	3.60%	3.60%
Headline CPI	2.4%	3.3%	3.0%	2.6%
Core CPI	3.3%	3.2%	2.8%	2.6%
AUD/USD*	0.65	0.67	0.66	0.66