Business Banking Outlook - Australia in Focus
(6 November 2023 - Australia) What’s ahead for the Australian economy? Which opportunities, challenges and trends are proving critical for businesses and their funding partners to navigate out of the current state of uncertainty and "two speed" growth?
Utilising East & Partners’ ongoing global primary voice of the customer intelligence and analytics, the 2023/24 Outlook offers a clear and evidence-based indication of what may lie ahead. Helping equip banking and finance leaders with a greater understanding of what lies behind today’s complex markets, enabling them to develop more robust strategies focused on the ultimate goal of sustainable growth.
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Macquarie Business Bank published five updates for Australian businesses as 2023 draws to a close
1. What’s the outlook for the Australian economy?
The economy is expected to continue slowing in the coming months, though Australia is in a position to avoid a recession given strengths such as healthy population growth.
2. Where will the cash rate go from here?
The risk remains that if inflation doesn’t decline as expected, more rate rises could be on the table.
3. Will the pace of property price gains continue?
Residential property prices in Australia are almost back to their 2022 peak noting Sydney and Melbourne, often the cities that climb and fall the furthest, are already showing signs of settling.
4. What is the outlook for inflation?
Inflation is a paramount focus for the RBA, which has labelled high inflation as “corrosive and damaging” if it’s persistent. Inflation in Australia is currently sitting at 5.4 percent, down from the peak of 7.8 percent in 2022.
5. What is the outlook for the labour market, is the tightness easing as expected?
As the economy slows, it’s likely that demand will weaken, meaning the labour market’s tightness will begin to ease.
“There are a few big issues for the Australian economy at the moment. One of them is inflation. That is obviously placing pressure on household budgets, and it also means that interest rates are likely to remain high for the time being” stated Macquarie Group Lead Global Economist, Dan Fabbro.
“The economy doesn’t work well when inflation is high. It is harder for businesses to plan, and people spend time protecting themselves against inflation rather than on more productive activities,” the RBA’s former Governor, Philip Lowe, said in a speech earlier this year.
“The second issue is falling productivity in the economy. Productivity is ultimately one of the key drivers of prosperity in an economy, so the fact that it is falling is a concern. It’s also a concern from an inflation perspective. If productivity keeps falling, it will make it harder for inflation to come down. The third key issue is housing affordability. At the moment, housing affordability in some metrics is about as bad as it’s been since the late 1980s” Fabbro added.