KPMG chief economist Brendan Rynne stated the financial outlook for the primary half of this yr was wanting robust, given the economic system had slowed to a “snail’s tempo” via the final six months of 2023.
“Larger rates of interest and low client confidence have lastly had a major affect 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 stated.
The Reserve Financial institution board holds its first two-day assembly, adopted by a press convention by governor Michele Bullock, early subsequent week.
Rynne stated the argument for conserving rates of interest on maintain after which beginning to ease financial coverage was rising.
“The slowdown within the demand facet, coupled with the anticipated slowdown in inflation, will subsequently strengthen the case for an additional pause within the RBA’s February money charge assembly, and our expectation is that the subsequent motion within the money charge will probably be a reduce,” he stated.
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 international locations will take pleasure in a gentle touchdown, partly resulting from central banks decreasing rates of interest. Progress in the US 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 increase by 1.4 per cent this yr and a couple 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, stated the outlook, whereas nonetheless gentle, was enhancing.
“The clouds are starting to half. The worldwide economic system begins the ultimate descent towards a gentle touchdown, with inflation declining steadily and progress holding up. However the tempo of enlargement stays gradual, and turbulence might lie forward,” he stated.
Gourinchas stated disinflation may occur quicker than anticipated, particularly if the roles market began to loosen.
IMF chief economist Pierre-Olivier Gourinchas says the worldwide economic system is a gentle 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 stated 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 stated the US was doing higher than anticipated, however there have been fewer optimistic 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 progress in anticipated methods – and lots of Australians are beneath stress,” he stated.
“Whereas inflation doesn’t at all times 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.”
Minimize via the noise of federal politics with information, views and knowledgeable evaluation from Jacqueline Maley. Subscribers can signal as much as our weekly Inside Politics e-newsletter right here.