Australian Economy Forecast for 2024/2025

Australia’s economy is poised for moderate growth in 2024 and 2025, driven by strong public investment, a recovery in household consumption, and increased international tourism and student arrivals. Despite global uncertainties and domestic challenges, the outlook remains cautiously optimistic.

Economic Growth and Predictions

The Reserve Bank of Australia (RBA) forecasts GDP growth of around 1.5% in 2024, improving to approximately 2.5% by the end of 2025, supported by robust public infrastructure projects and a rebound in household consumption (RBA, 2024). Employment growth is expected to remain positive, with the unemployment rate anticipated to rise slightly to 4.5% by the end of 2024 (Commonwealth Bank, 2024).

Inflation and Interest Rates

Inflation remains a significant concern, with the RBA predicting it will take until late 2024 or early 2025 to return to the target range of 2-3% (RBA, 2024). High services inflation, driven by strong demand and rising labor costs, is a primary factor keeping inflation elevated. The RBA is expected to start cutting interest rates in the second half of 2024, providing some relief to consumers and businesses (Vanguard, 2024).

According to the Commonwealth Bank, inflation will decelerate to 3% by the end of 2024, allowing for a gradual easing of monetary policy with a potential 75 basis point cut starting in September 2024 and continuing into 2025 (Commonwealth Bank, 2024).

The Jobs Market in Focus

The employment data remains strong, with recent reports recording an increase in employment of over 54,000 in early 2024, compared to consensus expectations of below 20,000. This indicates robust labor market performance (Commonwealth Bank, 2024).

Despite the strong employment figures, overall earnings growth has been tepid. If wages growth remains subdued, there will be reduced pressure on the RBA to tighten monetary policy (Vanguard, 2024).

The unemployment rate is expected to edge up slightly due to population growth outpacing job creation, but the overall labor market outlook remains positive (Commonwealth Bank, 2024).

The Housing Sector Will Also Be Crucial

  • The housing market is expected to remain robust, with dwelling prices projected to rise by 5% in 2024, supported by low interest rates and high demand (CoreLogic, 2024).
  • There is some evidence of stabilization, but the risk of overheating remains. The RBA may need to tighten monetary policy if there are signs of financial instability due to high property prices (Commonwealth Bank, 2024).
  • Overall, interest rates are likely to increase slightly in the first half of 2025, with the potential for more aggressive tightening if inflationary pressures persist (RBA, 2024).

Geopolitical Risks Important

  • Geopolitical tensions, particularly between the US and China, will continue to impact the Australian economy. The US Presidential election in 2024 and ongoing conflicts in the Middle East and Ukraine pose significant risks (World Economic Forum, 2024).
  • The Australian dollar is sensitive to global risk sentiment. Positive developments in global equity markets and a stable Chinese economy could support the AUD (ING, 2024).
  • However, any significant downturn in China or escalation of geopolitical conflicts could negatively affect the AUD and overall economic stability (TD Securities, 2024).

The Australian Dollar

The Australian dollar (AUD) is projected to experience moderate appreciation over the next two years. Several factors contribute to this outlook, and the global outlook on currencies and international money transfers including interest rate differentials, commodity prices, and global economic conditions.

According to ING, the AUD/USD exchange rate is expected to reach 0.71 by June 2024 and further rise to 0.73 by December 2024. This forecast is based on favorable domestic factors and the AUD’s current undervaluation compared to other G10 currencies (ING, 2024).

The Commonwealth Bank anticipates a positive tone for the Australian dollar, predicting a potential rise to 0.72 by the end of 2024. They highlight the expected rate cuts by the RBA in the second half of 2024, which will support the AUD by making Australian assets more attractive to investors (Commonwealth Bank, 2024).

However, TD Securities cautions that the AUD remains sensitive to global risk sentiment and commodity prices. Any significant downturn in global economic conditions, particularly in China, or a decline in commodity prices could negatively impact the AUD. They forecast the AUD/USD to rise to 0.66 by the end of Q1 2024, 0.68 by the end of Q2, 0.69 by the end of Q3, and 0.72 by year-end (TD Securities, 2024).

MUFG analysts expect the AUD to benefit from underlying yield support, predicting the exchange rate to strengthen to 0.71 by the end of 2024. They note that the Australian rate market expects the RBA to begin cutting rates during the second half of the year, lagging behind other major central banks such as the Fed. This delay in rate cuts will provide short-term yield spreads that support the AUD (MUFG, 2024).

Moreover, the Australian economy’s heavy reliance on commodity exports means that global commodity prices, particularly for iron ore and coal, will continue to play a crucial role. Higher prices for these commodities will support a stronger AUD, while any decline could pose risks (ING, 2024; TD Securities, 2024).

Overall, the outlook for the Australian dollar in 2024 and 2025 is cautiously optimistic, with several analysts predicting moderate appreciation. However, the AUD’s performance will be closely tied to global economic conditions, commodity prices, and geopolitical developments.


Australia’s economic outlook for 2024 and 2025 is cautiously optimistic, with moderate growth, gradual easing of inflation, and a resilient housing market. However, global economic conditions, commodity prices, and geopolitical risks will play a crucial role in shaping the economic landscape. Policymakers and businesses will need to remain agile and responsive to these external factors to ensure sustained economic stability and growth.