‘Slow Grind’ Ahead for Australia’s Economy in 2025

By Ian Rogers

Australia’s economy is set for a challenging 2025, as the interplay of high interest rates, inflation, rising unemployment, China’s economic slowdown, and global uncertainty under Donald Trump’s second US presidency shapes a complex year. Leading economists predict a slow recovery, with growth remaining below trend.

Recovery Will Be Gradual

Challenger chief economist Jonathan Kearns forecasts that gross domestic product (GDP) will pick up slowly as inflationary pressures ease, boosting consumer confidence and spending. “GDP growth will slowly improve as inflation dissipates and interest rate cuts take effect,” Kearns said, though he cautioned against expecting a quick turnaround.

Interest Rates to Fall, But Modestly

Economists anticipate the Reserve Bank of Australia (RBA) will begin cutting rates by mid-2025, most likely in May, as inflation moves closer to the RBA’s target range of 2–3% annually. Independent economist Nicki Hutley supports earlier rate cuts to provide relief for stretched borrowers but warns of limited reductions.

“We might see two or three rate cuts, but borrowers shouldn’t expect substantial relief,” Hutley said.

Inflation Easing into Control

Inflation, which has dominated economic discourse, is expected to ease further. The latest data shows annual inflation at 2.8%, its lowest level since mid-2021, but underlying inflation remains higher at 3.5%, above the RBA’s target. UBS chief economist George Tharenou predicts both headline and core inflation will moderate in 2025, supported by government energy subsidies.

Labor Market to Soften

After surprising strength in 2024, unemployment is expected to rise, reaching 4.3%, according to the RBA. Slower economic growth and reduced public sector hiring will likely ease labor market pressures, while wage growth is expected to decline from its peak.

China’s Slump Hits Australia

China’s faltering economy remains a significant risk for Australia, particularly for key exports like iron ore and coal. While AMP’s Diana Mousina expects Chinese stimulus measures to support moderate growth, Hutley is less optimistic, warning of ongoing weakness in demand.

Global Volatility Looms

The return of Donald Trump as US president adds uncertainty, with proposed tariffs on China potentially impacting Australia indirectly. Economists remain cautious but suggest Trump’s focus on market performance could temper his more extreme policies.

A Year of Cautious Optimism

Economists agree 2025 will bring modest improvements, with tax cuts, easing inflation, and real wage growth offering some relief. However, the slow pace of recovery means economic divergence between households is likely to persist.

“2025 won’t be transformative,” Kearns said. “But with inflation easing and rates falling, we’ll see gradual improvement.”

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Gold Coast Emerges as Economic Powerhouse Outpacing Nation’s Capitals

By Ian Rogers

The Gold Coast is solidifying its position as a national leader in economic growth, with a new report revealing it outpaced all mainland capital cities in 2023. The Gold Coast Economic Outlook 2024, launched during Gold Coast Business Week, highlights the city’s rapid rise, driven by diversification, population growth, and robust business investment.

Exceptional Economic Growth

The report shows the Gold Coast’s Gross Regional Product (GRP) grew by 3% in 2023, almost double the forecast of 1.6%, making it Australia’s fastest-growing economy in the post-pandemic era. This positions the city ahead of Greater Perth, Brisbane, Adelaide, and the Australian Capital Territory in GRP growth.

Between 2021 and 2023, the Gold Coast achieved a cumulative growth rate of 5.5%, more than double Sydney and Melbourne’s 2.5%, and exceeding Brisbane’s 4.5%. The city’s economy is now valued at $45.38 billion, surpassing forecasts by $630 million.

Per Capita Productivity

The Gold Coast’s economic contribution per capita stands at $68,134, exceeding forecasts by 13%. This impressive figure is attributed to increased efficiency and a growing number of high-income residents.

Diverse and Resilient Economy

Mayor Tom Tate attributes the city’s economic success to its diversified economy, strong population growth, and record employment levels.

“The Gold Coast has become much more than just a tourism destination,” says Tate. “Our city offers diverse employment opportunities, strong business investment incentives, and a favourable environment for economic activity, creating a sustainable cycle of growth.”

• Employment growth surged 6.93% in 2023, driven by new businesses relocating to the region and existing ones expanding.
• The Gold Coast’s population, currently at 666,000, is forecast to reach one million by 2040.

The city’s diversified economy provides resilience against sector-specific downturns, enabling faster recovery from economic shocks, such as those experienced during the pandemic.

A National Leader in GRP Growth

The Gold Coast is poised to maintain its economic momentum, with the report forecasting 10.07% GRP growth between 2024 and 2028, outpacing Greater Brisbane (9.04%), Queensland (7.93%), and the national average (7.9%).

Business Confidence and Investment

The city leads in business capital reinvestment, recording a 13.3% reinvestment rate in 2023 compared to negative rates in Greater Brisbane and Queensland. By 2028, this rate is projected to climb to 14.3%, significantly outpacing Brisbane (5.47%) and the national average (9.2%).

“Reinvestment signals confidence in future growth prospects and enhances productivity, driving overall economic output,” the report states.

Sectoral Growth Highlights

Technology

• Leading economic growth with a 50% growth rate in 2023, up from 20% in 2021.
• Forecast to grow by over 90% annually by 2028.

Screen Industry

• The film and television sector is projected to grow by over 40% annually by 2028, supported by city-led initiatives like a Creative Industries Precinct in Miami and new film studios at Yatala.

Sports

• Growth set to double from 30% in 2023 to over 70% annually by 2028.

Professional Services

• Driven by population and business growth, this sector is on track to become the third-fastest-growing industry in the region.

Legacy Industries

• Tourism, Manufacturing, and Health remain critical to the economy despite slower growth, contributing significant dollar value to the region.

Case Study: Ryan Aerospace

Gold Coast-based Ryan Aerospace, a leading developer of high-tech flight simulators, demonstrates the city’s innovation-driven growth. The company, which won the 2024 Queensland Premier’s Export Award in Advanced Technologies, recently made major capital investments to enhance supply chain control and productivity.

Positioning for the Future

The report emphasises the Gold Coast’s competitive advantage due to its untapped economic capacity compared to larger cities.

“While cost-of-living pressures are felt nationwide, the Gold Coast mitigates these through diverse employment opportunities and strong business growth,” says Mayor Tate. “It’s no surprise the Gold Coast continues to attract investment, residents, and visitors.”

With its robust growth trajectory, diversified economy, and strategic investments, the Gold Coast is well-positioned to sustain its momentum and redefine itself as a key player on Australia’s economic map.

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Business Closures Reach Four-Year High Amid Cost Pressures

By Ian Rogers

Business insolvencies in Australia have hit a four-year high, with rising costs and financial pressures forcing many companies to shut their doors. According to debt-monitoring firm CreditorWatch, the business failure rate rose to 5.04% in October 2024, nearing the peak of 5.08% seen during the height of the COVID-19 pandemic in October 2020.

On an annual basis, insolvency rates are now 25% higher than pre-pandemic levels.

Why Are Businesses Struggling?

CreditorWatch identified three main reasons for the increase in insolvencies:

1. Higher Cost of Living: Consumers are tightening their spending, particularly on discretionary items, affecting business revenues.
2. Higher Cost of Doing Business: Rising electricity prices, insurance premiums, rent, and wage increases have put pressure on operating costs, especially for smaller businesses.
3. Tax Debt Recovery: The Australian Taxation Office (ATO) is actively pursuing $35 billion in unpaid tax debts, with many affected businesses in the hospitality and construction sectors.

Sectors Most Affected

• Hospitality:
  • This sector had the highest failure rate, averaging 8.5% over the past year.
  • CreditorWatch predicts the rate will climb further to 9.1% in the next 12 months.
• Construction:
  • The construction sector’s failure rate averaged 5.3%, though it appears to be stabilizing.
  • Long-standing cost pressures and reduced activity due to high interest rates have strained many businesses.

Both sectors also face the highest levels of tax debt and defaults, further limiting their financial viability.

Broader Financial Challenges

The report highlighted a rise in business-to-business payment defaults, indicating that more companies are struggling to pay their bills. Arrears have increased across most industries, reflecting the cumulative impact of rising costs and economic pressures.

Ivan Colhoun, CreditorWatch’s chief economist, remarked “Unfortunately, higher costs and interest rates are leading to more arrears and business failures. It’s an expected but unfortunate consequence of the current environment.”

Will Interest Rate Cuts Help?

The Reserve Bank of Australia (RBA) is unlikely to cut interest rates at its December meeting. Rates have remained steady at 4.35% since November 2023, with economists expecting the first cuts in the first half of 2025.

While inflation fell to 2.8% in the September quarter and unemployment held steady at 4.1% in October, the RBA has signalled it won’t reduce rates until inflation drops further or unemployment rises.

Mr. Colhoun noted that even if rates are cut, the effects will take time to materialize. However, lower inflation could provide some relief by reducing cost-of-living pressures and encouraging consumer spending, potentially boosting businesses in the medium term.

Future Uncertainties

While consumer and business confidence have shown modest improvement in recent months, challenges remain:

• Global Risks: A potential shift in U.S. trade policy, including proposed tariff increases on major Australian trading partners, could create additional uncertainties for businesses.
• Tax Debt Recovery Delays: The impact of delayed tax cuts and ongoing tax collection efforts could exacerbate financial strain for some businesses.

The Road Ahead

While some sectors show signs of resilience, the rising insolvency rates underscore the need for continued government and industry support. Businesses in hospitality and construction, in particular, will require targeted relief and reforms to navigate these challenging conditions.

The long-term outlook hinges on broader economic stability, interest rate adjustments, and efforts to reduce operational costs for struggling businesses.

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Business Confidence Surges as Inflation Declines, Hitting a Two-Year High

By Robert Heyward

Roy Morgan Business Confidence rose sharply in October 2024, increasing by 12.4 points to 106.7. This marked the most positive sentiment in over two years, driven by falling inflation and growing optimism about the Australian economy and business investment.

Key Drivers of the Increase in Confidence

The October rise in Business Confidence coincided with significant declines in inflation:

• Monthly inflation: Dropped to 2.1% in September, as announced in late October, down from 2.7% in August and 3.5% in July.
• Quarterly inflation: Reached 2.8% for the September quarter, its lowest level since March 2021 and within the RBA’s target range of 2–3%.

This decline in inflation has improved economic sentiment and heightened expectations of future interest rate cuts, aligning Australia with trends seen in central banks overseas.

Roy Morgan Monthly Business Confidence Australia

Improved Sentiment Across Key Indicators

• Financial outlook:
  • 46.3% of businesses (up 5.2 percentage points) expect to be better off financially in a year.
  • Only 20.6% (down 4.4 points) anticipate being worse off.
• Economic outlook:
  • 59% of businesses (up 6.8 points) expect “good times” economically over the next year, the highest level since February 2022.
  • Confidence about the economy over the next five years also rose, with 35.6% expecting “good times” (up 4.4 points).
• Investment sentiment:
  • 42.9% (up 6.9 points) believe the next 12 months is a “good time to invest” in growing their business.
  • Only 35.2% (down 10.4 points) consider it a “bad time to invest,” the lowest level since June 2021.

Business Confidence by State in October 2023 vs October 2024

State-by-State Analysis

Business Confidence improved across most states, with New South Wales leading at 111.6, followed by Queensland (105.7), Western Australia (105.2), Victoria (104.4), and South Australia (102.4).

Tasmania (89.0) was the only state with confidence below the neutral level of 100, reflecting political instability within its Liberal-led government.

Industry Performance

The most confident industries in September and October included:

1. Public Administration & Defence: 160.1 (+48.9 points year-on-year).
2. Education & Training: 127.3 (+6.7 points).
3. Finance & Insurance: 121.6 (+20.7 points).
4. Recreation & Personal: 112.0 (+16.9 points).
5. Professional, Scientific & Technical Services: 111.0 (+11.9 points).

At the lower end, industries like Transport, Postal & Warehousing (72.6), Mining (78.3), and Agriculture (85.7) reported subdued confidence, with the Transport sector consistently lagging throughout the year.

Business Confidence for Top 5 and Bottom 5 Industries in September & October 2024

Commentary from Roy Morgan CEO Michele Levine

“Roy Morgan Business Confidence surged in October, reaching its highest level since April 2022,” Ms. Levine said.

“This increase was driven by improved optimism about the economy and growing sentiment that the next 12 months is a good time to invest in business growth. The rapid decline in inflation, combined with expectations of potential interest rate cuts, has fostered greater positivity among businesses.”

Ms. Levine also noted strong performances across major states and industries but highlighted the need for targeted support in lagging sectors such as Transport, Postal & Warehousing, and Tasmania’s struggling economy.

Conclusion

Roy Morgan Business Confidence is now just 4.5 points below its long-term average of 111.2, signalling a steady recovery in sentiment as inflation declines and businesses prepare for a potentially favourable economic environment.

For more detailed insights, the Roy Morgan Business Confidence Report is available via subscription.

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NSW Businesses Poised to Shine at Global Expo in China

By Robert Hayward

The NSW Government is backing 29 businesses from the food, beverage, and health supplement sectors as they prepare to showcase their products at the China International Import Expo (CIIE) this week. The six-day trade show, China’s premier import-focused event, draws dignitaries and exhibitors from over 150 countries, offering NSW companies a direct connection to buyers, distributors, and potential customers throughout China.

As NSW’s largest two-way trading partner for nearly 20 years, China continues to be a top consumer of the state’s agricultural exports, valued at $3.6 billion for 2023/2024. NSW’s wine exports have also surged since the removal of import tariffs earlier this year, signalling continued growth opportunities, especially for the state’s premium food and beverage sector.

Last year’s CIIE saw NSW businesses secure $40 million in export deals, and the NSW Government is once again committed to facilitating new opportunities for expansion and success. Among this year’s exhibitors is Mrs Toddy’s Tonics from Sydney’s Northern Beaches, which will present its range of plant-based beverages, already stocked in Australian supermarkets.

Other participating businesses include Pablo & Rusty’s Coffee Roasters, Australian Vintage Wines, Balance Water, and Noumi. The CIIE will take place in Shanghai from 5–10 November 2024.

For more information about the event and the full list of NSW businesses that’ll be exhibiting visit here.

Minister for Industry and Trade Anoulack Chanthivong said:

“The China International Import Expo is a leading event on the global trade calendar and offers unparalleled opportunities for NSW exporters to connect with buyers and distributors in China.”

“We are excited to once again showcase the best from across NSW at this prestigious import-focused event, including meat from the Riverina, wine from the Hunter Valley, spirits from Wollongong, and health supplements made in Sydney.”

“China has a strong appetite for produce made in NSW, which is globally recognised for its high quality and safety standards, with demand only set to grow.”

Mrs Toddy’s Tonics Co-Founder Sophie Todd said:

“We’re thrilled at the opportunity to introduce a proudly Australian, female-led brand to China, and look forward to showcasing the Mrs Toddy’s Tonic range on the international stage.

“We know that Chinese consumers are becoming more health conscious and are turning to products with natural ingredients, so there’s enormous potential for a business like ours to establish a presence in this lucrative market.”

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