Australia Faces its Longest Stretch of Sub-Par Economic Growth since 1990s Recession

Australians are bracing themselves for their country's longest stretch of economic slow down since the 1990s recession. Deloitte Access Economics has released a report stating that Australia's economy is expected to slow sharply through the coming months, with GDP growth expected to slip below 2% for two consecutive years.

This financial year and next year, Australia's economy is expected to slow down dramatically, with Deloitte predicting a 1.3% growth in the current financial year and a 1.8% growth in the next financial year. This will be the first time in over two decades that Australia's economy will experience back-to-back years of sub-2% growth.

Deloitte partner Stephen Smith said that the war against Iran and the recent increase in inflation had exposed the economic vulnerabilities that had developed over recent years. "Australia is now structurally exposed in ways that have become hard to ignore. Deloitte Access Economics has rarely adopted such a downbeat assessment of the short-term outlook," he said.

The report also states that inflation will remain high throughout 2026-27, at around 4%, before dropping to 2.6% in 2027-28. Real wage growth is expected to go backwards in 2026-27, while unemployment is expected to average 4.9% next financial year before peaking at 5% the following year.

The Reserve Bank is expected to lift official interest rates once more this year, taking the cash rate to 4.6% by August. However, financial markets expect the Reserve Bank to cut interest rates in the coming months, with a 38% chance of a rate hike by February and a 50% chance of a second cut by Christmas.

The war against Iran has had a significant impact on Australia's economy, with Deloitte stating that it has "exposed economic vulnerabilities" that had developed over recent years. The reliance on the AI sector has also raised concerns about the economy's dependence on expected profits.

However, there are some positives to take from the report. Business investment is expected to grow by 6.9% this year and 5% in 2027-28, while the surge in spending on data centres and technology within Australia offers the chance of a much-needed lift in productivity.

The cost-of-living pressures remain the biggest weight on the economy, with mortgage repayments increasing by $350 a month on the average home loan due to the Reserve Bank's three interest rate hikes this year. Higher prices for rents, insurance, groceries, and electricity are also buffeting households.

Treasurer Jim Chalmers said that the report confirms the lingering costs and consequences of the war against Iran, but noted that the nation's economic fundamentals remain sound. "Under Labor, Australia has the lowest average unemployment of any government in half a century, smaller deficits and less debt than the Coalition left us, booming business investment, with tax cuts and higher wages that the right-wing parties oppose," he said.

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Australia's economy is expected to slow down dramatically, with Deloitte predicting a 1.3% growth in the current financial year and a 1.8% growth in the next financial year. This will be the first time in over two decades that Australia's economy will experience back-to-back years of sub-2% growth.

Treasurer Jim Chalmers said that the report confirms the lingering costs and consequences of the war against Iran, but noted that the nation's economic fundamentals remain sound. "Under Labor, Australia has the lowest average unemployment of any government in half a century, smaller deficits and less debt than the Coalition left us, booming business investment, with tax cuts and higher wages that the right-wing parties oppose," he said.

Australia has experienced several consecutive years of economic growth, but this is the first time since the 1990s that the economy is expected to experience back-to-back years of sub-2% growth. This has raised concerns about the country's economic fundamentals.

The war against Iran has had a devastating impact on the global economy, and Australia is no exception. The country's reliance on the AI sector has also raised concerns about the economy's dependence on expected profits. Deloitte has stated that the largest impact to the economy was the war against Iran.

The Reserve Bank's decision to hike interest rates has also had a significant impact on the economy. Mortgage repayments have increased by $350 a month on the average home loan, and higher prices for rents, insurance, groceries, and electricity are also buffeting households. Deloitte has stated that households remain under pressure due to the renewed inflation pressure, higher borrowing costs, volatile fuel and transport costs, and weak confidence.

Deloitte is expecting the Reserve Bank to cut interest rates in the coming months, with a 50% chance of a second cut by Christmas. This is in contrast to the Reserve Bank's decision to hike interest rates earlier this year. Business investment is expected to grow by 6.9% this year and 5% in 2027-28, while the surge in spending on data centres and technology within Australia offers the chance of a much-needed lift in productivity.

Deloitte has stated that the largest impact to the economy was the war against Iran. Financial markets are also "frothy" with a heavy dependence on expected profits out of the AI sector. The cost-of-living pressures remain the biggest weight on the economy, with mortgage repayments increasing by $350 a month on the average home loan.

What's Next?

Deloitte is expecting the Reserve Bank to cut interest rates in the coming months. The Reserve Bank is expected to meet in August to discuss the cash rate. Financial markets are expecting a rate cut by September next year.

Australia's Economy in Crisis?

Australia's economy is facing its toughest challenge in decades. The war against Iran has exposed economic vulnerabilities that had developed over recent years. However, there are some positives to take from the report. Business investment is expected to grow by 6.9% this year and 5% in 2027-28.

Australia's economy is expected to slow down dramatically, with Deloitte predicting a 1.3% growth in the current financial year and a 1.8% growth in the next financial year. This will be the first time in over two decades that Australia's economy will experience back-to-back years of sub-2% growth.

Australians are bracing themselves for their country's longest stretch of economic slow down since the 1990s recession. Deloitte Access Economics has released a report stating that Australia's economy is expected to slow sharply through the coming months, with GDP growth expected to slip below 2% for two consecutive years.

This financial year and next year, Australia's economy is expected to slow down dramatically, with Deloitte predicting a 1.3% growth in the current financial year and a 1.8% growth in the next financial year. This will be the first time in over two decades that Australia's economy will experience back-to-back years of sub-2% growth.

Deloitte partner Stephen Smith said that the war against Iran and the recent increase in inflation had exposed the economic vulnerabilities that had developed over recent years. "Australia is now structurally exposed in ways that have become hard to ignore. Deloitte Access Economics has rarely adopted such a downbeat assessment of the short-term outlook," he said.

The report also states that inflation will remain high throughout 2026-27, at around 4%, before dropping to 2.6% in 2027-28. Real wage growth is expected to go backwards in 2026-27, while unemployment is expected to average 4.9% next financial year before peaking at 5% the following year.

The Reserve Bank is expected to lift official interest rates once more this year, taking the cash rate to 4.6% by August. However, financial markets expect the Reserve Bank to cut interest rates in the coming months, with a 38% chance of a rate hike by February and a 50% chance of a second cut by Christmas.