Economy carries more momentum into 2025 than expected in Australia

Access the full report to learn more about the key points outlined below:

• We’ve upgraded our 2025 GDP growth forecast for Australia by 0.2ppts to 2.1%. Growth in 2024 was in line with our forecast at 1%, but the economy carried a little more momentum into the end of 2024 than we had expected. Growth in Q4 was generated from an even contribution across the public and private sectors, which represents a broadening of momentum after a high reliance on the public sector for much of the last year.

• Household consumption growth picked up to 0.4% q/q in Q4. Utilities rebates weighed on consumption (with rebates recognised as public expenditure), but strength in discretionary spending gave growth a solid lift, aided by a strong Black Friday sales period. Discounting and cost-of-living rebates are giving growth a transitory boost. But an encouraging outlook for real income growth gives us confidence that consumption growth will be steady through 2025.

• The labour market remains in a tight position. The unemployment rate ticked up in January, but this was due to an element of labour hoarding that will unwind next month. There is still very little in the data that points to an imminent easing in labour market conditions.