2025 is expected to bring a recovery, improving on the economic strains of 2024, ScotPac reported.
Early indicators like the ANZ-Roy Morgan Australian Consumer Confidence Index, which rose 3.6 points at the start of the year, suggest optimism.
“Consumers’ view of financial conditions over the next 12 months jumped 5.7 points while the ‘time to buy a major household item’ subindex bounced 7.2 points,” said Madeline Dunk (pictured above left), ANZ economist. Dunk predicted continuous growth supported by fiscal policies and real wage increases.
Although consumer confidence is on the rise, Morgan Stanley’s economists warned of continued cautious spending behaviours throughout 2025. They predict that government spending will be a primary economic driver, particularly important as the federal election approaches in May 2025.
NAB economists, meanwhile, expressed optimism about a soft landing for the economy, noting that while population growth may be slowing, improvements at the individual level are expected to alleviate pressures on the household sector.
The unemployment rate has remained stable at 4.1%, a low figure historically.
Changes to student visa policies are expected to decelerate the strong pace of overseas migration, which has been a significant growth contributor in recent years, ScotPac reported.
Despite signs of recovery, business investment growth is slowing, with tepid recovery signs in dwelling investment.
“Alongside consumption, both of these components will need to see some improvement for the private sector to gain momentum,” NAB economists said, emphasising the need for a balanced economic upturn.
The RBA’s decision to hold the cash rate steady at 4.35% reflects ongoing concerns about inflation, though confidence grows that inflation is stabilising within target ranges.
Following recent CPI figures, bond market investors now see a 70% chance of a pre-election rate cut in February, a significant sentiment shift.
With Trump’s second term underway, the international economic outlook remains uncertain.
“Some of his policy agenda is very much the same as his first term, but it won’t turn out completely the same. A lot has changed since then. There will be similarities, but there will also be differences,” said Luci Ellis (pictured above right), Westpac chief economist.
As businesses navigate through 2025, adapting to economic pressures will be crucial.
“I think 2025 will continue to present challenges, anchored to the cost of living, the cost of goods and services, the cost of labour and the overall cost of doing business,” said Dean Firth of Macquarie Business Banking.
For businesses planning growth amidst uncertain economic times, exploring varied financial solutions becomes essential. With potential easing in cash flow pressures, now is an opportune time to assess funding options designed to foster stability and growth in challenging conditions, ScotPac reported.
Read the ScotPac insights here.