Key themes 2025: Inflation will be on voters’ minds in 2025 in Australia

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

• We think Australia’s growth prospects are set to improve in 2025. Lower inflation will be supportive of the growth outlook, although there is still only limited scope for policy easing next year. We expect growth will be subdued, with the outlook shaped by three key themes: 

• How strong will the consumer recovery be? Household spending should improve steadily in 2025. The recent downward trend in real incomes has been curbed as the squeeze from high inflation subsides and tax cuts flow through to households. Moreover, labour income growth will be steady, albeit a little weaker than during the recent past. Confidence indicators are improving, and balance sheets are generally in a good position.

• Construction handover brings challenges. The outlook for public and business investment will remain subdued in 2025. But this masks large sectoral swings, as health, utilities, and data centre projects will drive investment rather than transport and office projects. These projects bode well for activity and productivity growth, but the evolving nature and changing location of these works will present challenges in a sector still beset by capacity constraints.