KPMG chief economist Brendan Rynne mentioned the financial outlook for the primary half of this yr was wanting powerful, given the economic system had slowed to a “snail’s tempo” by the final six months of 2023.
“Larger rates of interest and low shopper confidence have lastly had a big influence on financial exercise, with measures of actual family disposable earnings, consumption and financial savings displaying a noticeable pullback in contrast with a yr in the past,” he mentioned.
The Reserve Financial institution board holds its first two-day assembly, adopted by a press convention by governor Michele Bullock, early subsequent week.
Rynne mentioned the argument for retaining rates of interest on maintain after which beginning to ease financial coverage was rising.
“The slowdown within the demand aspect, coupled with the anticipated slowdown in inflation, will subsequently strengthen the case for an additional pause within the RBA’s February money price assembly, and our expectation is that the following motion within the money price will probably be a lower,” he mentioned.
Monetary markets and most economists consider the RBA will begin slicing official rates of interest within the second half of this yr to assist help the economic system.
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The IMF, in its replace on the worldwide financial outlook, believes most nations will take pleasure in a comfortable touchdown, partially attributable to central banks lowering rates of interest. Development in the USA is tipped to ease barely, to 2.1 per cent this yr and 1.7 per cent in 2025.
The fund upgraded its outlook for the Australian economic system over this yr and subsequent. It’s forecasting GDP to broaden by 1.4 per cent this yr and a pair of.1 per cent in 2025, an enchancment of 0.2 per cent and 0.1 per cent on its predictions in October final yr.
The fund’s chief economist, Pierre-Olivier Gourinchas, mentioned the outlook, whereas nonetheless comfortable, was bettering.
“The clouds are starting to half. The worldwide economic system begins the ultimate descent towards a comfortable touchdown, with inflation declining steadily and development holding up. However the tempo of growth stays sluggish, and turbulence might lie forward,” he mentioned.
Gourinchas mentioned disinflation may occur sooner than anticipated, particularly if the roles market began to loosen.
IMF chief economist Pierre-Olivier Gourinchas says the worldwide economic system is a comfortable touchdown.Credit score: Bloomberg
However the giant variety of elections this yr, together with within the US, Britain and India, meant there was a danger of governments growing their spending in a bid to woo voters, which might add to inflationary pressures.
Treasurer Jim Chalmers mentioned the report confirmed inflation and the wars in Gaza and Ukraine have been contributing to the uncertainty that was weighing on the worldwide economic system.
He mentioned the US was doing higher than anticipated, however there have been fewer constructive indicators from China and Europe.
“Australia has not been immune from these challenges – with international uncertainty, excessive however moderating inflation and better curiosity weighing on development in anticipated methods – and lots of Australians are below stress,” he mentioned.
“Whereas inflation doesn’t all the time average in a straight line and there’s extra work to do, we’ve made welcome progress and our insurance policies have been serving to.”
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