Real GDP Growth

IBISWorld forecasts real GDP to increase by 2.2% in 2024-25, to $2.50 trillion. Private capital expenditure is expected to rise amid favourable business operating conditions as inflationary pressure gradually eases. However, according to the Reserve Bank of Australia (RBA), although inflation is forecast to fall within the target band of 2-3% in late-2024, it’s primarily driven by the energy rebates offered to households. This situation highlights the persistence of inflation and its potential to exert downward pressure on real GDP. Despite grappling with high debt levels, federal and state governments have announced infrastructure investments, including renewable energy projects that will support real GDP growth over the period. Although the unemployment rate is expected to rise and slow economic growth, the job market is projected to remain tight, maintaining unemployment at low levels by historical standards.

The pandemic resulted in one of the most significant economic downturns in Australia’s recent history. In June 2020, Australia entered a recession for the first time in almost three decades. The imposition of lockdowns by state governments, cessation of tourism, disrupted supply chains and high unemployment rates resulted in a significant reduction in human and economic activity. However, fiscal assistance schemes, such as the JobKeeper and JobSeeker stimulus packages, have led to a rebound in economic activity and growth.

Real GDP growth rebounded strongly from the pandemic-related declines, buoyed by high levels of government stimulus and the gradual easing of pandemic-related restrictions on movement. In 2021-22, pent-up demand and the lifting of border closures and state-wide lockdowns drove sharp growth in real GDP as household spending and merchandise trade soared. However, a steep rise in inflation during the 2022 calendar year and a corresponding increase in interest rates have weighed on real GDP growth, especially as cost of living pressures led to consumer sentiment plummeting. Capital expenditure on private dwellings has fallen over the period, thanks to declines in residential construction activity and dwelling commencements stemming from supply chain issues and subsequent rise in interest rates.

Despite troubles in the domestic economy, especially in the construction sector, other segments of the economy boomed amid a global rise in prices for particular commodities. Export opportunities for agriculture and mining firms surged as a combination of rising demand and surging prices allowed for a surge in the value of merchandise trade exports. Strong commodity export volumes in agricultural exports were helped by high levels of rainfall, resulting in multiple bumper crops in the two years through 2022-23. High prices for commodities, such as wheat, coal and gas, which were primarily driven by the Russia-Ukraine conflict, also supported the value of exports in the two years through 2022-23. More recently, prices have eased, which has led to successive declines in the value of merchandise exports. Moderating commodity prices and persistent inflationary pressures have curbed real economic growth in the two years through 2024-25. Overall, IBISWorld forecasts real GDP to grow at a compound annual rate of 2.6% over the five years through 2024-25.