The global economy is still recovering but inflation proves to be sticky. Domestically, inflation continues to move down towards the target band, but the progress is slower than expected. Domestic outlook remains positive, but weaker growth is expected for 2024.

Australian overview

Economic growth continues to weaken as the year progresses.

  • Economic activity in Australia continues to weaken as the year progresses, with GDP growth during the December quarter 2023 slowing down to 0.2 percent from 0.3 percent in the preceding quarter.
  • Large falls in dwelling investment, inventories, machinery and equipment, government-fixed capital investment across all tiers dulled down a couple of rays of economic sunshine, including non-dwelling construction and investment by state government corporations.
  • The softening in economic demand is not yet translated into weaker labour market conditions, with the latest labour market data in February showing strong employment growth and low unemployment rate.

Global landscape

Headline inflation has peaked across most advanced economies, but persistent core inflation has continued to cause headaches for monetary policymakers.

  • Inflation has dropped to be closer to central banks’ targets in many advanced economies. Nonetheless, it has remained uneven by component as energy and goods price inflation has eased, while housing and core services inflation has stayed elevated, leading to sticky non-tradables inflationary pressures.
  • The rapid monetary policy tightening cycle has been playing a role in disinflation and slow down global output growth, but the risk of a major recession has been lowered in major economies.
  • Despite weak economic growth, labour markets have remained remarkedly strong, with the global unemployment rate declining to the pre-pandemic levels of 5.1 percent.

Summary forecast

*values at end of period

KPMG forecasts of key macroeconomic indicators

Indicator Jun-23 Dec-23 Jun-24 Dec-24 Jun-25 Dec-25 Jun-26
GDP (Real) 3.2% 2.1% 1.4% 1.7% 2.0% 2.3% 2.4%
Inflation* 6.0% 4.1% 3.8% 3.5% 3.2% 2.7% 2.6%
Unemployment* 3.6% 3.9% 4.2% 4.5% 4.7% 4.6% 4.5%
AUD/USD* 0.67 0.66 0.68 0.69 0.70 0.71 0.73

Full details about the Australian economic conditions and forecasts can be found in KPMG's Australian Economic and Outlook: Q1 2024.

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