Deloitte Access Economics warns the country is heading for its longest stretch of sub-2% growth since the early 1990s recession, yet argues the Reserve Bank is likely to keep tightening policy. That combination of sluggish activity and lingering price pressures creates a difficult backdrop for households, businesses and policymakers.
Deloitte Access Economics cuts its outlook sharply in its latest quarterly forecasts released on Tuesday and now expects the economy to grow just 1.3% in the current financial year. Growth is then tipped to reach only 1.9% in 2027-28, meaning several years where national output expands at less than 2% annually.
The firm characterises this as the longest period of such weak growth in about 30 years, even as inflation remains strong enough to justify another Reserve Bank rate increase.
The report links this uncomfortable mix to a long period of poor productivity performance that leaves the economy more vulnerable to inflation at lower growth rates. Strong population increases have propped up headline economic output, according to Deloitte Access Economics, but have not delivered corresponding gains in output per person.
That gap means overall GDP has looked healthier than the underlying drivers of living standards, masking structural weaknesses. The result is an economy that now struggles with inflation flare ups even when growth is subdued.
Deloitte Access Economics argues this pattern reflects a deeper challenge for Australia’s policy settings, rather than just a temporary downturn. Weak productivity combined with reliance on population growth limits how fast the economy can expand without sparking price pressures.
That in turn narrows the Reserve Bank’s room to support activity because interest rates may need to stay higher even as growth drags. The tension between stabilising inflation and protecting living standards sits at the centre of the outlook the firm lays out.
