Growth
Australia’s economy is expected to grow slowly at 2.25% in 2025-26 and 2.5% in 2026-27. The direct economic impact of Ex-Tropical Cyclone Alfred is estimated to be up to 0.25% of GDP. The budget will record a deficit of $42.1bn in 2025-26 before improving. Debt levels remain high, increasing from 18.4% of GDP in 2023-24 to approximately 21.5% in 2025-26, and reaching 23.1% by 2028-29.
Employment
The unemployment rate has remained low, and the participation rate remains high, with over one million jobs created since May 2022. Approximately 80% of these new jobs were in the private sector since the second quarter of 2022. Unemployment is expected to peak at 4.25%.
Wages
Annual real wages have increased for five consecutive quarters and are forecast to rise by 0.5% in 2024-25. The Wage Price Index increased by 3.2% year-on-year in the December quarter of 2024, and is expected to grow by 3% year-on-year in the June quarter of 2025, rising to 3.25% by June 2026.
Inflation
Inflation is projected to be 2.5% for the year to the June quarter of 2025. The moderation of inflation has been supported by cost-of-living relief measures and a reduction in petrol prices toward the end of 2024. Electricity rebates and the indexation of rent assistance contributed to a reduction in headline inflation by 0.75% for the year to the December quarter of 2024.
Global Tensions
Global uncertainty has been heightened by trade tensions. The indirect effects of tariffs could be four times larger than the direct impact on Australia, underscoring the significance of affected trade flows between Australia, the United States, and China. Retaliatory tariffs, if implemented, would exacerbate losses in real GDP.