Global economic developments post-pandemic highlight a contrast in monetary and fiscal policy, complicating central banks’ inflation control efforts. Australia’s economy, heavily reliant on government spending, shows the weakest growth since 1991. Cost-of-living relief measures are affecting CPI calculations, presenting challenges for policymakers in estimating underlying inflation pressures. As inflation moderates, most advanced economies are reducing policy rates.
Australian overview
Economic activity remained weak throughout the year, with the September quarter 2024 National Accounts revealing 0.8% quarterly GDP growth, a level not seen since December 1991, excluding the COVID-19 period. GDP per capita continues its downward trend, declining 0.3% in the September quarter, marking seven consecutive quarters of declines.
- Household consumption recorded zero growth, influenced partly by government energy subsidies. The household saving ratio rose to 3.2% from 2.4% in the June quarter.
- Public sector wage growth outpaced the private sector (2.0% vs 1.2%). Labour productivity continued to fall, with GDP per hour worked down by 0.5%.
- Public investment rose strongly by 6.3%, driven by imports of defence equipment and investment in road and hospital projects. Private investment increased modestly by 0.1%.
- Business profitability weakened, with gross operating surplus falling 1.5%, led by a 3.9% decline in private non-financial corporations as the mining sector faced lower commodity prices
Global landscape
Stable global growth is expected but is threatened by rising trade tensions and protectionism.
- KPMG expects global growth to come in at a 3.1% pace in 2024, slightly lower than 2023 , and below the pre-pandemic norm of 3.6% from 2000 to 2019.
- As inflation moderates towards central bank targets, policy rate reductions are happening in most advanced economies. This is aimed at ensuring that growth stabilises around its long-term trend and that inflation remains within targets.
- With rising public-debt-servicing costs, necessary fiscal consolidation is underway in many economies to ensure debt sustainability while addressing economic shocks. Lower policy rates provide relief by lowering funding costs, but stronger efforts are needed to stabilise debt burdens.
Summary forecast
* Values at end of period
# Actual values
^ Forecast values
KPMG forecasts of key macroeconomic indicators
Indicator | 2023 (actual) | 2024 (forecast) | 2025 (forecast) | 2026 (forecast) |
---|---|---|---|---|
Real GDP (average annual) | 2.1% | 1.1% | 2.2% | 2.5% |
Real GDP (year-ended) | 1.5% | 1.4% | 2.4% | 2.3% |
Unemployment rate* | 3.9% | 4.1% | 4.2% | 3.9% |
Headline CPI | 4.1% | 2.3% | 3.3% | 3.3% |
Core CPI | 4.2% | 2.8% | 3.0% | 3.3% |
RBA cash rate | 4.35% | 4.35% | 3.60% | 3.60% |
AUD/USD* | 0.68 | 0.62 | 0.64 | 0.68 |
Full details about the Australian economic conditions and forecasts can be found in KPMG's Australian Economic and Outlook: Q4 2024.