Key issues still weigh on the Australian economy. Picture: NewsWire \/ John Appleyard <\/p>\n
Australian living standards are at risk despite households finally getting on top of their finances, Deloitte Access Economics warns.<\/p>\n
The national economy is tipped to pick up over the next 12 months, growing by 2 per cent in the 2025-2026 financial year before lifting moderately to 2.2 per cent in 2026-2027.<\/p>\n
A new Deloitte report says the Australian economy is finally showing \u201cgreen shoots\u201d, with falling inflation, rising wages, and interest-rate cuts all contributing to a stronger household budget that in turn is spurring on the economic recovery.<\/p>\n
Key issues still weigh on the Australian economy. Picture: NewsWire\/ Monique Harmer <\/p>\n
Deloitte Access Economics partner and report co-author Stephen Smith says rate cuts have been central to Australia\u2019s improving living standard.<\/p>\n
\u201cA single 25 basis point interest-rate cut is worth nearly $1700 a year for the average new borrower,\u201d he said.<\/p>\n
\u201cWe expect real household spending growth to improve from the 1.0 per cent recorded in the 2024-25 financial year to around 2.5 per cent in both 2025-26 and 2026-27, comfortably faster than broader economic growth in those two years.\u201d<\/p>\n
Mr Smith forecasts three additional rate cuts will lift household spending even further.<\/p>\n
\u201cSupporting this scenario is a predicted further 25 basis point cut by the Reserve Bank of Australia (RBA) at its meeting in December, followed by two more in 2026,\u201d he said.<\/p>\n
But Deloitte says it\u2019s a gradual recovery, not a boom, with key issues still weighing on the national economy.<\/p>\n
Roundtable should go around again<\/p>\n
It says Australian living standards remain well below pre-pandemic levels and are likely to remain that way for the best part of a decade, as a lack of reform fails to lift Australia\u2019s anaemic productivity growth.<\/p>\n
Productivity growth is a primary driver of living standards as it allows for higher wages, lower prices, greater consumption and ultimately more leisure time.<\/p>\n
Australia\u2019s productivity has fallen from gaining 1.8 per cent a year in 2003 to just 0.8 per cent in 2023-2024.<\/p>\n
According to Deloitte, last month\u2019s much talked about economic roundtable delivered \u201cno shortage of ideas\u201d, but waiting until 2028 to act on tax or investment reforms aimed at boosting productivity is too late.<\/p>\n
\u201cThe health and wealth of young people in Australia relative to their forebears is a significant and worsening issue,\u201d Mr Smith said.<\/p>\n
\u201cEfforts to arrest and correct that trend make for good policy.<\/p>\n
\u201cThey also happen to make for good politics \u2013 something that was not previously the case.\u201d<\/p>\n
In order to help increase Australia\u2019s living standards, Deloitte argues, policymakers need to double down on reforms that will lift productivity, beginning with ideas discussed at the roundtable.<\/p>\n
\u201cOn bigger-picture measures, there was recognition of a range of priority areas that Australia needs to tackle,\u201d Mr Smith said.<\/p>\n
\u201cThese include the need for tax reform, better and more efficient regulation, and policies to encourage greater investment.\u201d<\/p>\n
Australian living standards are not where they should be. Picture: NewsWire \/ Nicholas Eagar <\/p>\n
The roundtable is set to \u201cinform the next three budgets,\u201d with about 30 business leaders and economists agreeing on 10 key objectives.<\/p>\n
They included embracing AI, wide consensus for a road user charge that would hit electric vehicles, and further tax reform, acknowledging that current settings benefited older Australians and punished the young.<\/p>\n
In the immediate aftermath, the government announced it was removing red tape and abolishing 500 nuisance tariffs, which while welcomed were \u201cmodest in scope\u201d, Deloitte said.<\/p>\n
It took aim at the lack of innovation and initiative that came out of the three-day event.<\/p>\n
\u201cMany economists felt the Treasurer\u2019s pre-roundtable edict that only ideas with \u2018consensus\u2019 support would be considered was far too restrictive,\u201d Mr Smith said.<\/p>\n
\u201cAlmost any meaningful economic reform creates both winners and losers, making true \u2018consensus\u2019 impossible.\u201d<\/p>\n
Trump threat remains<\/p>\n
The Deloitte report also warns of \u201cenormous\u201d challenges from the global economy.<\/p>\n
They say several decades of supply chains being \u201cknitted together\u201d to reduce costs for households have been unwound while noting populations and plummeting birthrates also smash growth.<\/p>\n
The Reserve Bank used its statement on monetary policy on Tuesday to also flag the uncertainty in the global economy and how it could impact Australia\u2019s economy.<\/p>\n
RBA governor Michele Bullock said domestic and international pressures led to the board holding the official cash rate Picture: NewsWire \/ Jeremy Piper <\/p>\n
\u201cThere is a little more clarity on the scope and scale of US tariffs and policy responses in other countries, suggesting that more extreme outcomes are likely to be avoided,\u201d the RBA monetary board said.<\/p>\n
\u201cTrade policy developments are nevertheless still expected to have an adverse effect on global economic growth over time.\u201d<\/p>\n
The RBA warns that such a scenario could lead to weaker labour market conditions in Australia.<\/p>\n
\u201cThe global economy remains a worry and should not be undersold,\u201d Deloitte Access Economics head Pradeep Philip said after Tuesday\u2019s rate decision.<\/p>\n
\u201cGeopolitics is driving uncertainty and remains little understood; the future drivers of growth, business investment and innovation, continue to languish.<\/p>\n
\u201cThis is the conundrum the RBA is grappling with \u2013 holding back rate cuts for too long means growth suffers; cutting too fast brings inflation risks.\u201d<\/p>\n","protected":false},"excerpt":{"rendered":"Key issues still weigh on the Australian economy. Picture: NewsWire \/ John Appleyard Australian living standards are at…\n","protected":false},"author":2,"featured_media":182776,"comment_status":"","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[11],"tags":[64,63,99,72488,182,164,34458,68297,117022,183,117021,117023],"class_list":["post-182775","post","type-post","status-publish","format-standard","has-post-thumbnail","category-economy","tag-au","tag-australia","tag-business","tag-deloitte-access-economics","tag-economic-growth","tag-economy","tag-living-standards","tag-mr-smith","tag-productivity-growth","tag-reserve-bank-of-australia","tag-stephen-smith","tag-the-australian-economy"],"_links":{"self":[{"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/posts\/182775","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/comments?post=182775"}],"version-history":[{"count":0,"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/posts\/182775\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/media\/182776"}],"wp:attachment":[{"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/media?parent=182775"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/categories?post=182775"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/tags?post=182775"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}