Oxford Economics says Australia’s economic growth will be improved but subdued in 2025

Australia is set for another year of subdued economic growth as falling commodity prices and a looming Trump trade war weigh on the outlook.

Fresh forecasts from consultancy Oxford Economics also warned any bad news on inflation could delay interest rate relief from May to July or even later.

It comes as the Federal Government was accused of “wasting time” by a top economist who believes Australia’s financial luck may be running out.

The economy will expand 2 per cent in 2025, according to Oxford. That’s below other estimates but in line with the Federal Budget.

It would mean another sluggish year after a weak 2024.

“Our forecast for growth in 2025 is much lower than it was a year ago, owing to the lingering inflation problem and tight policy settings,” Oxford economist Sean Langcake said.

“As we head into an election season and with many of Australia’s trading partners set to announce tariff policies, there is an air of uncertainty that will weigh on business sentiment in the new year.”

Mr Langcake predicted cost-of-living pressures would spark an electoral swing against the Albanese Government, citing similar results in other advanced countries including the US.

Oxford did expect some good news for households as a prolonged decline in incomes has likely been arrested.

Stage 3 tax cuts and lower inflation mean Aussies should have more in their wallets.

“We think the fundamental conditions are strong and believe consumption growth will improve steadily, albeit not spectacularly, in 2025,” Mr Langcake said.

Dr Chalmers is already bracing for rough numbers on Wednesday with new data set to show economic growth at 0.4 per cent through July to September.

“We know that higher interest rates, global economic uncertainty and cost-of-living pressures are weighing on households and the economy, and we expect to see that in this week’s National Accounts data,” Dr Chalmers said.

“We’ve been planning and preparing for a soft landing and with the economy still growing, inflation back in the band and unemployment with a 4 in front it, we are on track for one.”

He talked up the stage three tax cuts and cost-of-living support, while taking aim at Coalition promises to cut spending.

But respected economist Chris Richardson said governments had been “wasting time” with no structural reform for two decades.

He released a report predicting the Commonwealth would run a whopping $220 billion of deficits through to June 2028, with sinking iron ore prices a key factor.

Revenue will slow after forecasts were previously upgraded by $365b since 2022.

“The luckiest government Australia has ever seen — at least in budgetary terms — didn’t take the opportunity to get the national Budget better prepared for the long haul,” he said.

Dr Chalmers said the Government had turned “two big Liberal deficits” into surpluses, lowered interest costs and got spending on aged care and disability support under control.