Australia Economic Outlook: Q1 2024 - KPMG Australia (2024)

FAQs

What is the economy outlook for Australia in 2024? ›

The Australian economy staggered into 2024, edging close to recession with just 0.1 percent growth over the quarter. The Australian economy grew by a meagre 0.1 percent over the first quarter of 2024 and just 1.1 percent over the previous 12 months.

KPMG forecasts

We expect GDP growth to be around mid-1% levels for the remainder of 2024. Unemployment will rise slowly but steadily over next two years from 4.2% now to 4.7%. by mid-2026. Wages growth still high but has peaked and will start to soften.

Consumers and businesses are likely to continue cutting spending and investments ahead, suggesting economic growth decelerated to 0.6 percent annualized in Q3 2024. GDP growth probably will be lackluster in Q4 2024, expanding at a tepid pace of about 1 percent annualized.

Gross Domestic Product (GDP) rose 0.2%, the eleventh consecutive quarter of growth. The Australian economy grew 1.5% in 2023-24, the weakest annual growth (excluding the COVID-19 pandemic) since 1991-92, a year that included the gradual recovery from the 1991 recession.

Inflation continues to moderate but remains high.

Goods price inflation has declined but services price inflation remains high, supported by continued excess demand in the economy and strong domestic cost pressures, both for labour and non-labour inputs.

The cash rate is assumed to move broadly in line with expectations derived from surveys of professional economists and financial market pricing. Using this methodology, the cash rate remains around its current level of 4.35 per cent until mid-2024 before declining to around 3¼ per cent by the middle of 2026.

Out of the world's 62 major economies in Euromonitor International's Macro Model, five emerging Asian countries are expected to have the highest real GDP growth rates in 2024: India, the Philippines, Vietnam, Indonesia and China.

Analysts project 11.5% earnings growth and 5.5% revenue growth for S&P 500 companies in 2024. Fortunately, analysts see positive earnings and revenue growth for all eleven market sectors this year.

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Executives' views on the world economy remain more positive than negative, though they believe a recession is increasingly likely. In their own economies, concerns over unemployment are growing.

What is the recession indicator for 2024? ›

In August 2024, the Sahm recession indicator was 0.57, a slight increase from the previous month. The Sahm Rule was developed to flag the onset of an economic recession more quickly than other indicators.

Global recession outlook

There is now a 35% chance that the global economy will enter a recession by the end of 2024, and a 45% chance that it will do so by the end of 2025.

Our economy grew a modest 0.2 per cent in the June quarter 2024 and 1.5 per cent over the 2023-24 financial year. While this was the eleventh consecutive quarter of GDP growth, it was the sixth consecutive quarter of GDP per capita falls (total GDP divided by the population of Australia).

KPMG International is forecasting global growth will slow from the 2.7% 2023 pace to 2.5% in 2024 and rebound to 2.7% next year. Meanwhile, inflation is expected to continue to cool, but in many countries the price pressure will take longer to unwind than it took to emerge.

Australia's GDP per capita is currently nearly 80 per cent of that of the US, having risen from around 75 per cent in the mid-1980s. To provide a simple decomposition of the long-term evolution of GDP per capita, the Australian Treasury often uses the '3 Ps' framework.

A strong rise in unemployment — typically associated with a recession — is not foreseen. Key forecasts from the RBA out to December 2024 include: GDP growth of 1.7% (revised up from 1.6% in May). Unemployment rate of 4.3% (It's currently 4.1%).

Lokar anticipates the recession will be mild but will demand that companies plan for a downturn to ensure their companies are protected and to even find opportunity during the slower business cycle. “This is not going to be as bad as 2008 or 2009.

According to Gartner, IT spending in Australia is expected to exceed $133 billion in 2024, which is a substantial increase of 7.8% on the previous year (Figure A). This will be driven most significantly by demand in software, including cloud services, which will increase by 12.8%.

Annual CPI inflation was 3.6 per cent in the March 2024 quarter, lower than the 4.1 per cent annual rise in the previous quarter.