Recent months have seen a rebound in private sector activity, a rise in consumer sentiment, and continued movement in residential property prices. However, the outlook remains finely balanced. Inflation has re-emerged as a concern, employment growth has moderated, and wage increases have slowed, all while global risks persist.
According to the latest CommBank View report, Australia’s economy has begun to recover following a period of subdued expansion, with consumer spending and housing values both increasing. Gross domestic product has reached 1.8% and is projected to rise to 2.2% by the end of 2026. Nevertheless, employment growth is losing momentum and inflation remains persistent, leading the RBA to maintain its current policy stance.
Although household spending is broadening, many Australians remain cautious, continuing to increase their savings. Business investment has yet to show significant improvement, and the labour market is showing signs of softening.
“There are emerging tensions in recent economic data, complicating the outlook,” said Belinda Allen (pictured right), head of Australian economics at CBA. “Improvements in economic activity have been accompanied by weaker employment growth, and upside surprises to monthly inflation data. This tension has created a challenge for the central bank in determining the extent and timing of further easing in monetary policy.”
Internationally, economic prospects have generally improved as the effects of interest rate reductions and US tax cuts become more apparent. However, ongoing tensions between the United States and China highlight ongoing risks. Despite most US trading partners having reached agreements on reciprocal tariffs, a comprehensive deal between the US and China remains out of reach. The US economy has so far absorbed tariffs with limited impact on consumer prices, but employment in sectors reliant on imports has declined.