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Australia Real GDP is projected to grow by 1.8% in 2023 and 1.4% in 2024. Tightening financial conditions and a weaker outlook for real incomes will weigh on growth. Labour market pressures will ease, with the unemployment rate rising to 4.6% by the end of 2024. Inflation, which likely peaked in late 2022, is projected to continue declining in 2023 as supply chain and commodity related cost pressures wane. A downside risk is a stronger-than-projected cutback in household consumption amid falling house prices. Further monetary policy tightening will be necessary to bring inflation down to the 2-3% target range. Fiscal policy is expected to remain broadly neutral over the projection period. Further fiscal reforms should be considered to improve the sustainability of public finances, including redesigning the National Disability Insurance Scheme and improving the governance of infrastructure project selection and implementation. Reforms that improve the integration of women in the labour market and reduce the gender wage gap are also a priority. In this context, changes to tax and transfer policy settings, measures that improve childcare availability and adjustments to the parental leave system should be considered. Economic activity slowed further Real GDP growth in Australia slowed further in the last quarter of 2022, as strong inflation and tightening financial conditions weighed on demand. Population growth has picked up, partly due to border reopening and the return of international students following the pandemic, sustaining economic growth and providing some relief to the tight labour market. Inflation, although still high, appears to have peaked, with yearly growth in the CPI slowing to 7% in Q1 2023, driven by slowing goods and tradables inflation, although services inflation remains elevated. Quarterly wage growth appears to be gradually easing despite ongoing tightness in the labour market, with the unemployment rate at 3.7% near historic lows. High-frequency indicators suggest that consumption has slowed amid tightening financial conditions, with mortgage rates on outstanding loans reaching 5.9% in March, up from a low of 2.9% in April 2022.
Australia
1. Civilian population aged 15 years and over. 2. Trimmed mean is the average rate of inflation after ‘trimming’ away the items with the largest price changes (positive or negative). It is the weighted average of the middle 70% of items. Source: Australian Bureau of Statistics. StatLink 2 https://stat.link/7prgbz
OECD ECONOMIC OUTLOOK, VOLUME 2023 ISSUE 1: PRELIMINARY VERSION © OECD 2023