January 29, 2024:The global economy is entering a delicate stage of post-pandemic rebalancing in 2024. Growth is likely to slow below trend until a shift in monetary policy puts economic activity back on a more sustainable path. Disinflation is likely to continue, but it will be slow and the road ahead will be difficult.
Flagship December 2023 version released Business outlook report, Steven Smith, Partner and Lead Author of the Report, Deloitte Access EconomicsSaid: “While a global soft landing remains a possibility, increased uncertainty and volatility could significantly change the narrative. Several factors cloud the economic outlook, including the lagging effectiveness of monetary policy, global conflicts, structural changes in China, and elections in countries that will account for 60% of global GDP in 2024.
“Meanwhile, the outlook for the Australian economy remains weak. When ABS releases data for the December 2023 quarter, Deloitte Access Economics expects it will almost certainly show that Australia's economic growth rate has fallen below 2% for the first time in three years.
“This is not surprising given that the RBA has increased the cash rate by 425 basis points in 2022-2023, resulting in hardship for many Australian households.
“Spending by immigrants and older Australians who have avoided the pain of mortgage rates has helped avoid recession, but The growth outlook for Australia's economy is modest at best.
“If realized, excluding the pandemic period, the expected growth rate of 1.3% in the 2024 calendar year would be the lowest since the early 1990s recession. We expect this year to be the year in which policy makers' thinking shifts from lowering the inflation rate to increasing the economic growth rate.
The Bureau of Meteorology measures both ambient temperature and apparent (or “felt”) temperature. It may also be useful to think about the Australian economy in the short term. The economy will grow, but it will “feel like” a recession.
“It’s just a mouthful, but Real disposable income of households per person This is one way to measure how everyday Australians 'feel' about the economy. This is calculated after taking into account inflation and population growth and taking into account taxes and mortgage payments. The boost during the pandemic was helped by stagnant population growth, but also by government benefits designed to support households and businesses.
“It is therefore no surprise that when these payments were withdrawn and population growth returned at full throttle, real household disposable income per capita fell. Deloitte Access Economics estimates that households experience a total peak-to-trough decline of around 9% on a fiscal year basis. Indeed, real household disposable income per capita is expected to remain below the trend seen between the 2008 financial crisis and the pandemic for at least the next five years.
“In other words, the economic situation will continue to be quite difficult for some time.”
“And as the disruption caused by COVID-19 recedes from view, the Australian economy is likely to be returning to where it was before the pandemic hit the headlines, perhaps by the end of 2024. The main economic challenge for the country will not be to reduce inflation, but to increase growth.
“So what? Falling inflation, a pick-up in real wage growth and the possibility of a rate cut in the second half of 2024 will cause Australian households to breathe a sigh of relief. But with a more robust long-term growth outlook To do so, some economic reform will be needed. As has been the case for more than 20 years, tax policy is at the top of the list. The last major tax reform was the introduction of the Goods and Services Tax in 2000. did.”
Please note that the forecasts included in the December 2023 edition of Business Outlook were finalized and provided to subscribers prior to the announcement of the proposed amendments to the federal government's Phase 3 tax cuts. Deloitte Access Economics does not believe the proposed amendments will have a material impact on the economic outlook or change the forecasts contained in the plan. Business outlook.
Deloitte Access Economics' cost calculations of the proposed changes show an approximately $2.6 billion hit to the 2024-25 federal budget on an accrual basis. However, the impact on the federal budget looks quite different on a cash basis, as Treasury recommendations make clear, with Treasury projecting a $1.6 billion boost to the bottom line. Deloitte Access Economics agrees with Treasury's recommendation that the changes to Stage 3 will have no appreciable impact on inflation (and therefore interest rates).
industry
“As 2024 begins, some industries appear to have turned a corner, while others are bracing for the pain ahead,” Smith said. “The mining industry has resisted weak global demand, but its performance is likely to falter. Cost of living pressures have plagued the retail industry for almost a year, while a surge in international students in 2023 will This led to a significant recovery in the education industry.
“Despite housing construction not keeping pace with population growth, businesses looking to grow are being held back by their inability to attract enough skilled workers. 's new immigration strategy has been amplified in importance, and this will have a range of implications for Australia's key industries.'
states and territories
“The outlook is mixed across Australia’s states and territories, including different exposures to cost of living pressures. Mortgage lending is growing in New South Wales and Victoria, where higher interest rates will hit household budgets even further. Despite the hit, Western Australia and Queensland continue to enjoy strong commodity export revenues.”
Key Forecasts: Deloitte Access Economics Business Outlook, December 2023
