{"id":2081,"date":"2025-02-05T05:16:07","date_gmt":"2025-02-05T05:16:07","guid":{"rendered":"https:\/\/actinvest.com.au\/?p=2081"},"modified":"2025-02-05T05:16:07","modified_gmt":"2025-02-05T05:16:07","slug":"australias-economic-growth-set-to-recover-in-2025","status":"publish","type":"post","link":"https:\/\/actinvest.com.au\/index.php\/australias-economic-growth-set-to-recover-in-2025\/","title":{"rendered":"Australia\u2019s economic growth set to recover in 2025"},"content":{"rendered":"

GDP growth is set to gain momentum despite sticky inflation and high interest rates.<\/p>\n

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Vanguard expects Australia\u2019s Gross Domestic Product will gradually recover and increase by 2.0% in 2025 after experiencing its slowest growth rate in 32 years during 2024.<\/div>\n
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This is despite the overhang of sticky inflation and elevated interest rates. Vanguard forecasts that the core Australian inflation rate will fall to 2.5% during 2025, and that the Reserve Bank\u2019s cash rate will be lowered to 3.5% from the current 4.35% level by year end.<\/div>\n
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This month's Consumer Price Index (CPI) release suggests that inflation is continuing to decline within a jobs market that remains tight.<\/div>\n
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Yet the underlying inflation rate remains well above the Reserve Bank\u2019s 2%-3% target band, while the unemployment rate of 3.9% is well below the non-accelerating inflation rate of employment (NAIRU) of 4.5%.\u00a0<\/div>\n
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We see limited upside for labour productivity growth in 2025.<\/div>\n
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\u201cThe RBA shouldn\u2019t draw a firm conclusion from the November CPI indicator, in our view,\u201d said Dr Grant Feng, Vanguard Senior Economist. \u201cThat said, the RBA will likely stay on hold until the second quarter of 2025, as the last mile of the inflation fight will take longer to conquer.<\/div>\n
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\u201cWe expect a modest sequential improvement in economic momentum, underpinned by rising real household incomes as inflation levels slowly subside, a rebounding housing market, expectations of rate cuts, and structural drivers of public investment.<\/div>\n
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\u201cAlthough private demand has weakened in response to the RBA\u2019s monetary policy tightening, public sector demand remains robust, which is a trend that\u2019s likely to continue in the lead-up to the 2025 federal election.<\/div>\n
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\u201cMoreover, a significant factor contributing to the stickiness of inflation in Australia is stagnant labour productivity growth, which has left the economy still operating near its capacity despite softening demand.\u201d<\/div>\n
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Dr Feng said that market sectors may face ongoing challenges in 2025 due to low business investment.<\/div>\n
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\u201cOn the other hand, the non-market sector (comprising health care and social assistance, education and training, and public administration and safety) is expanding at a faster pace than the market sector, which shifts employment towards lower-productivity sectors and affects overall productivity performance,\u201d he said.<\/div>\n
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\u201cGiven the ongoing government support for non-market sectors and lukewarm business investment, we see limited upside for labour productivity growth in 2025. This will ensure the labour market remains tight and could put upward pressure on unit labour costs.<\/div>\n
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\u201cOn the external front, a potential U.S. tariff hike is expected to have limited direct impact on Australia, partially offsetting the effects of increased policy stimulus in China.\u201d<\/div>\n
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Important Information<\/div>\n
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Vanguard Investments Australia Ltd (ABN 72 072 881 086 \/ AFS Licence 227263) is the product issuer and the Operator of Vanguard Personal Investor. We have not taken your objectives, financial situation or needs into account when preparing this information, so it may not be applicable to the particular situation you are considering. You should consider your objectives, financial situation or needs, and the disclosure documents for a particular Vanguard product before making any investment decision. Before you make any financial decision regarding Vanguard's financial products you should seek professional advice from a suitably qualified adviser. A copy of the Target Market Determinations (TMD) for Vanguard's financial products can be obtained at vanguard.com.au free of charge and include a description of who the financial product is appropriate for. You should refer to the TMD before making any investment decisions. You can access our IDPS Guide, PDSs Prospectus and TMD at vanguard.com.au or by calling 1300 655 101.<\/div>\n
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Past performance information is given for illustrative purposes only and should not be relied upon as, and is not, an indication of future performance.<\/div>\n
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This publication contains certain 'forward looking' statements. Forward looking statements, opinions and estimates provided in this publication are based on assumptions and contingencies which are subject to change without notice, as are statements about market and industry trends, which are based on interpretations of current market conditions. Forward-looking statements including projections, indications or guidance on future earnings or financial position and estimates are provided as a general guide only and should not be relied upon as an indication or guarantee of future performance. There can be no assurance that actual outcomes will not differ materially from these statements. To the full extent permitted by law, Vanguard Investments Australia Ltd (ABN 72 072 881 086 AFSL 227263) and its directors, officers, employees, advisers, agents and intermediaries disclaim any obligation or undertaking to release any updates or revisions to the information to reflect any change in expectations or assumptions.<\/div>\n
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This publication was prepared in good faith and we accept no liability for any errors or omissions.<\/div>\n
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\u00a92025 Vanguard Investments Australia Ltd. All rights reserved.<\/div>\n
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Tony Kaye<\/div>\n
22 Jan 2025<\/div>\n
vanguard.com.au<\/div>\n
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GDP growth is set to gain momentum despite sticky inflation and high interest rates.<\/p>\n","protected":false},"author":1,"featured_media":2082,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":[],"categories":[4],"tags":[],"_links":{"self":[{"href":"https:\/\/actinvest.com.au\/index.php\/wp-json\/wp\/v2\/posts\/2081"}],"collection":[{"href":"https:\/\/actinvest.com.au\/index.php\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/actinvest.com.au\/index.php\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/actinvest.com.au\/index.php\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/actinvest.com.au\/index.php\/wp-json\/wp\/v2\/comments?post=2081"}],"version-history":[{"count":1,"href":"https:\/\/actinvest.com.au\/index.php\/wp-json\/wp\/v2\/posts\/2081\/revisions"}],"predecessor-version":[{"id":2083,"href":"https:\/\/actinvest.com.au\/index.php\/wp-json\/wp\/v2\/posts\/2081\/revisions\/2083"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/actinvest.com.au\/index.php\/wp-json\/wp\/v2\/media\/2082"}],"wp:attachment":[{"href":"https:\/\/actinvest.com.au\/index.php\/wp-json\/wp\/v2\/media?parent=2081"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/actinvest.com.au\/index.php\/wp-json\/wp\/v2\/categories?post=2081"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/actinvest.com.au\/index.php\/wp-json\/wp\/v2\/tags?post=2081"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}