The RBA faces mixed signals ahead of the February meeting in Australia

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

• We’ve lowered our 2025 GDP growth forecast for Australia by 0.1ppt to 1.9% due to a weaker outlook for near-term population growth. Data received over the past month have been generally strong, but we think the outlook is more complex. The labour market remains healthy, recording strong employment gains and an unemployment rate of 4% in December. Encouragingly, there are signs of improvement in consumer spending, which we expect will continue over 2025.Inflation surprised to the downside, spurring market hopes for a rate cut in February.

• Partial indicators suggest household consumption growth picked up in Q4. Most notably, retail volumes per capita increased for the first time in two and a half years. Temporary subsidies are boosting growth, but improving real income growth due to the tight labour market and falling inflation will underpin a more sustained pickup over 2025.