Shaping tomorrow: Economic growth pathways and a net zero future
It was pleasure to welcome our esteemed clients and guests to our economic forecasting conference in Sydney, Melbourne and online.
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Global Economic Outlook – The shifting pattern of global growth
At Oxford Economics Australia’s Economic Outlook Conference, held in in Melbourne on Tuesday, 25th February and in Sydney on Thursday, 27th February, Managing Director David Walker opened with a thought-provoking introduction, providing a clear overview of the key topics covered.
The conferences examined the shifting dynamics of the Australian and global economy, addressing critical challenges shaping growth and inflation in 2025 and beyond. As post-pandemic disruptions gave way to new uncertainties, discussions explored fiscal sustainability, evolving interest rates, and their varied impacts on sectors, cities, and markets.
Sessions also analyzed changes in world trade—highlighting that while much revolves around Trump, there are broader forces at play—before investigating potential pathways to a decarbonized future for Australia’s economy. Delegates gained actionable insights from expert-led sessions featuring Innes McFee, Oxford Economics’ Global Chief Economist, and the leading team in Australia.
Global Economic Outlook – The shifting pattern of global growth
Innes McFee, Managing Director of Macro and Investor Services at Oxford Economics, highlighted how the global economy has returned to a familiar pattern of weak growth and stable inflation as pandemic-related disruptions fade. However, underlying shifts in economic dynamics have increased growth volatility and geopolitical uncertainty. He discussed key challenges, including the sustainability of public finances and the long-term trajectory of interest rates, emphasizing how economic policy responses will shape growth and inflation in 2025 and beyond. His presentation explored these influences across sectors, cities, and investment markets, providing valuable insights into the evolving global economic landscape.
Download the presentation deck here
Trump victory accelerates the changes to world’s trade
Trump has announced or threatened a range of fresh tariffs in recent weeks. While we expect the overall macro impact to our existing forecasts to be small, the impacts for specific countries and industries will be meaningful,” said Ben Udy, Lead Economist, Macro Forecasting & Analysis, for Oxford Economics Australia. “The recent announcement of retaliatory tariffs could see very large tariff increases on the likes of Egypt, India, Brazil, Thailand and Vietnam.
“To some extent these tariffs are an attempt to extract policy concessions from targeted countries so we don’t think the threat of retaliatory tariffs significantly alters the macro outlook. “
Oxford Economics Australia’s previous analysis of the impact of tariffs on global trade flows highlighted Singapore and Australia as two of the countries which would capture the greatest share of US imports in the coming decade. Given that both these countries impose no tariffs on the USA, this finding is likely to be strengthened further by the imposition of retaliatory tariffs as trade in Asia reroutes. “Australia has an opportunity to try to capitalise on the tariffs being imposed on other countries, and grow its trading relationship with the US,” said Udy.
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Is Australia set for growth or stagnation?
The Australian economy was listless coming into 2025, but there are good reasons to expect an improvement. Inflation has eased and looser policy settings will start to support growth,” said Sean Langcake, Head of Macro Economic Forecasting, Oxford Economics Australia. “However, the economy has become overly reliant on public demand as a primary source of momentum. While this has kept a technical recession at bay, there are signs of private sector activity being crowded out.”
Public demand has been a major driver of growth in recent years, and Oxford Economics Australia believes it will be difficult for either major party to walk away from existing social spending commitments.
“But the economy is facing capacity constraints and badly needs a turnaround in productivity growth,” said Langcake. “At this stage, the election campaign appears bereft of answers to the tougher questions.” The labour market continues to operate beyond the level consistent with inflation returning to target – a surprising development given GDP growth has been so anaemic. Yet, forward looking indicators and data on the most vulnerable parts of the labour market are still holding up well.
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Australia’s journey to net zero and its economic implications
The Australian Sustainability and Reporting Standards have been enforced from 1 January 2025. The standards require companies to disclose the challenges and opportunities they would face in a rapidly decarbonising world, as well as a warmer than expected world caused by a slower than expected climate transition.
“2024 is estimated to have been the hottest year on record and global emissions are still rising despite the global attention on climate change in recent years,” said Kristian Kolding, Head of Consulting, Oxford Economics Australia. “2030 climate targets are edging ever closer and geo-politics are in a severe state of uncertainty.
“Our understanding of climate change and its economic impact continues to evolve. While economists have historically considered the damage of incremental temperature increase on economic output, the economic costs of natural disasters such as the latest fires in Los Angeles or Townsville floods is causing a significant rethink as climate volatility amplifies damages.”
“With this in mind, is it still reasonable to consider an orderly transition to net zero – or is a disorderly net zero scenario more relevant? Similarly, is it reasonable to expect physical peril simply from the perspective of lower productivity from incremental changes in temperature or do you need to consider the impact of natural disasters continuously depleting the economy’s capital stock?” Oxford Economics Australia’s scenarios lean toward the latter as it considers the potential impact of future climate scenarios on the Australian economy.
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Summary
Oxford Economics Australia’s conference provided invaluable insights into Australia’s economic outlook for 2025 and beyond. With a focus on understanding global trends and their local implications, attendees gained a deeper understanding of the challenges and opportunities shaping Australia’s economic landscape with invaluable insights.
For more information about Oxford Economics Australia and our research capabilities, visit our website.
Author
David Walker
Managing Director, Oxford Economics Australia
+61 (0) 2 8458 4234
David Walker
Managing Director, Oxford Economics Australia
Australia
David is the Managing Director at Oxford Economics Australia and heads the office for Australia and New Zealand. In August 2013 he moved to Sydney to establish the firm and is continuing to grow the business in this region as well as leading key projects within Australia.
Before moving to Australia David worked as part of Oxford Economics’ business development team in London. Prior to joining Oxford Economics he worked for KPMG as a management consultant, specialising in financial risk management including stress testing and scenario analysis. During this time he was also seconded to the main Financial Services regulatory body, the Financial Services Authority (FSA). He completed his degree in Economics at Nottingham University and also studied the chartered institute for securities investment diploma.