{"id":784159,"date":"2026-07-07T05:47:21","date_gmt":"2026-07-07T05:47:21","guid":{"rendered":"https:\/\/www.newsbeep.com\/au\/784159\/"},"modified":"2026-07-07T05:47:21","modified_gmt":"2026-07-07T05:47:21","slug":"australia-exposed-to-worst-growth-since-early-1990s-recession-new-report-warns-as-inflation-rises-productivity-stalls","status":"publish","type":"post","link":"https:\/\/www.newsbeep.com\/au\/784159\/","title":{"rendered":"Australia ‘exposed’ to worst growth since early-1990s recession, new report warns as inflation rises, productivity stalls"},"content":{"rendered":"

Australia faces its weakest growth since the 1990s recession as the nation\u2019s economy is \u201cstructurally exposed in ways that have become hard to ignore\u201d, a new report has warned.<\/p>\n

Deloitte Access Economics was forced to downgrade its outlook for the Australian economy in its latest forecast amid higher inflation, interest rate rises and the oil shock.<\/p>\n

It now expects the economy to grow 2.2 per cent in the 2026 financial year, 1.3 per cent in FY27 and 1.9 per cent in FY28.<\/p>\n

This is down on previous forecasts of 2.4 per cent, 1.9 per cent and two per cent respectively.<\/p>\n

Deloitte Access Economics partner Stephen Smith said the economy was expected to \u201climp along\u201d at the longest stretch of sub-two per cent growth since the early-1990s recession.<\/p>\n

\u201cAustralia\u2019s growth outlook has deteriorated over the past six months,\u201d Mr Smith said in a statement.<\/p>\n

\u201cThe economy is still expanding, but growth has slowed and the outlook has become more fragile.<\/p>\n

\u201cInflation has reaccelerated, interest rates have moved higher, and the oil price shock triggered by conflict in the Middle East is not yet fully resolved.\u201d<\/p>\n

He also blamed the recent rate rises as high inflation forced the central bank to lift the cash rate 75 basis points.\u00a0<\/p>\n

“The differences (driving the latest forecast are) three RBA rate increases, an ongoing cost of living challenge for households and another spurt of inflation caused by the Middle East,” Mr Smith told Sky News.<\/p>\n

“Even though oil prices are now down, the whole real price level in Australia remains high.”<\/p>\n

Deloitte\u2019s dire assessment of Australia\u2019s economy comes as trimmed mean inflation was 3.6 per cent<\/a> in the year to May while productivity growth was just 0.3 per cent in the March quarter.<\/p>\n

Trimmed mean inflation examines the middle 70 per cent of price changes and is central to the Reserve Bank of Australia\u2019s cash rate decisions.<\/p>\n

The RBA tries to bring this measure to between two and three per cent.<\/p>\n

However, the lowest trimmed mean inflation has gone to since the pandemic was 2.8 per cent in June 2025.<\/p>\n

Meanwhile, productivity examines the number of hours worked against GDP.<\/p>\n

The latest 0.3 per cent reading is well below the 1.7 per cent average between 2004 and 2016.<\/p>\n

Mr Smith said the turmoil of 2026 had exposed the vulnerabilities plaguing Australia\u2019s economy.<\/p>\n

\u201cAustralia is now structurally exposed in ways that have become hard to ignore,\u201d he said.<\/p>\n

\u201cDeloitte Access Economics has rarely adopted such a downbeat assessment of the short-term outlook.\u201d<\/p>\n

He said that strong population growth had masked the weak productivity and lifted GDP while hurting living standards.<\/p>\n

\u201cYears of insufficient investment in housing, infrastructure, energy and the economy\u2019s productive capacity have left the supply side of the economy struggling to keep pace with demand,\u201d Mr Smith said.<\/p>\n

Australia\u2019s lacklustre productivity growth has left it vulnerable to inflation resurging in the economy.<\/p>\n

Inflation began bouncing back in the second half of last year when the private sector picked up, boosting GDP but pushing the economy beyond its speed limit.<\/p>\n

The price rises were exacerbated by the oil crisis in the Middle East, which not only forced transport costs higher but pushed up prices in other areas of the economy.<\/p>\n

\"\u2018Massive<\/p>\n

Mr Smith said Australia is not in a position where it can overlook its poor productivity, geopolitical exposure or stretched household balance sheets.<\/p>\n

\u201cThey are harder to dismiss now that inflation is sticky, investment needs are rising and the global environment is more uncertain,\u201d he said.<\/p>\n

Deloitte\u2019s dire outlook follows data platform Trading Economics showing Australia has the equal second-highest trimmed mean inflation rate among all advanced economies.<\/p>\n

Australia\u2019s trimmed mean inflation rate of 3.6 per cent is equal to the Netherlands\u2019 rate, but remains below only Iceland\u2019s rate of 6.5 per cent.<\/p>\n

EQ Economics managing director Warren Hogan said the RBA\u2019s fight against inflation after the pandemic was ineffective<\/a>.<\/p>\n

\"Excessive<\/p>\n

\u201cThis inflation is getting quite embedded now,\u201d Mr Hogan told Business Now.<\/p>\n

\u201cThe Reserve Bank has failed to hit their target all through these last few years.\u201d<\/p>\n

Pressed on whether the central bank\u2019s decision to lower the cash rate 75 basis points throughout 2025 was a \u201cmistake\u201d, Mr Hogan vehemently agreed.<\/p>\n

\u201cIt was,\u201d he said.<\/p>\n

\u201cThe RBA and others will argue that they did it on the base of the information they knew but they also had openly said they were running an experiment and never raised rates as much as other countries.<\/p>\n

\u201cI can’t see any argument for this not being anything but a disaster.\u201d<\/p>\n","protected":false},"excerpt":{"rendered":"Australia faces its weakest growth since the 1990s recession as the nation\u2019s economy is \u201cstructurally exposed in ways…\n","protected":false},"author":2,"featured_media":784160,"comment_status":"","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[4],"tags":[64,63,14934,72488,164,17119,208,5465,44,117021],"class_list":["post-784159","post","type-post","status-publish","format-standard","has-post-thumbnail","category-australia","tag-au","tag-australia","tag-deloitte","tag-deloitte-access-economics","tag-economy","tag-gdp","tag-growth","tag-inflation","tag-news","tag-stephen-smith"],"_links":{"self":[{"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/posts\/784159","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=784159"}],"version-history":[{"count":0,"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/posts\/784159\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/media\/784160"}],"wp:attachment":[{"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/media?parent=784159"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/categories?post=784159"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/tags?post=784159"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}