What happened
Australia's households are expected to face 'recession-like' conditions, according to Deloitte Access Economics. The firm's latest Business Outlook report downgraded its growth forecasts, predicting the economy will expand by 1.7 percent in 2027-28 and 2.1 percent in 2028-29. This is due to stagnant productivity gains, which have been masked by strong population growth driven by migration.
Deloitte partner Stephen Smith noted that Australia's pre-pandemic growth relied heavily on adding people rather than improving worker output. Labour productivity averaged 2.0 percent annually between the 1990s recession and the 2008 global financial crisis, but dropped to 1.2 percent between 2008 and the pandemic.
The Reserve Bank of Australia's decision to lift the cash rate to 4.6 percent, its fourth increase this year, is expected to squeeze mortgaged households. Deloitte expects another 25 basis point rise in November, which will add around $9,000 a year in interest costs to the average new owner-occupier loan.
The population grew by 1.4 percent in the 12 months to March, with net overseas migration accounting for 292,100 of the 392,700 new residents. However, gross domestic product rose by just 0.4 percent in the June quarter, indicating that population growth is not translating to economic prosperity.
