Australia (Commonwealth)_ In 2023, the global economic landscape experienced a notable shift, characterized by the conclusion of a rapid rise in interest rates, the repercussions of which are expected to unfold in the coming year. For individuals reliant on modest government support, such as the $54 daily jobseeker allowance or the $43 youth allowance, the economic upswing has seemingly bypassed them, leading to a prolonged struggle.
Edwina MacDonald, acting CEO of the Australian Council of Social Service, highlights the severe challenges faced by low-income households, emphasizing the difficult choices between essential needs like food, rent, and utilities.
National economic indicators for the September quarter revealed a stagnation in overall consumption, with household disposable income experiencing a 5.6% decline over the year. This dip raises concerns about a potential contraction in GDP for the October-December period, according to Gareth Aird, the Commonwealth Bank’s head of Australian economics.
Despite these challenges, there are signs of resilience in the economy. The labor market demonstrated momentum by adding over 61,000 jobs despite the Reserve Bank’s November rate increase. Additionally, the property market rebounded, ending the year on a positive note.
The government’s midyear economic and fiscal outlook (Myefo) painted a surprisingly robust picture, with an unexpected budget surplus for the second consecutive year. Australia’s economic position stands out compared to peer nations like New Zealand, the UK, and the US, which grapple with increased deficits and borrowing.
The Myefo also offered a more optimistic outlook on global economic support for Australia’s GDP, with net exports projected to contribute significantly. Overseas inflation trends, particularly in the US and China, appear favorable for Australia’s economic prospects.
Looking ahead to 2024, the Reserve Bank of Australia (RBA) retains the flexibility to adjust the cash rate from its 12-year high to counter any potential downturn. Market expectations suggest a possible rate cut by June, aligning with potential moves by the US Federal Reserve.
While challenges persist, economists like Warren Hogan and Cherelle Murphy anticipate a “soft landing” for the economy in 2024. Factors such as ongoing construction projects, government infrastructure spending, and the imperative to accelerate renewable energy initiatives offer glimpses of upside potential. As the new RBA governor, Michele Bullock, emphasizes a balanced approach, 2024 may navigate the delicate balance between economic restraint and growth.
