According to AMP senior economist Diana Mousina, the Australian economy is slowing to its slowest pace in 10 years, with private sector spending collapsing.

Earlier this year, RBA governor Philip Lowe noted, “Domestically, the board today discussed how the Australian economy appears to have reached a gentle turning point. The economy has been through a soft patch recently, but we are expecting a return to around trend growth over the next year.” 

However, Ms Mousina disagrees, suggesting the weak consumer spending data will continue to be a drain on Australia’s economic growth.

“Consumer spending is a vital component to the growth outlook, accounting for 60 per cent of GDP. Household spending is growing at just over 1 per cent annually, its lowest rate of growth since early 2009, and growth will remain low in 2020-21” Ms Mousina said.

The economist also noted that lower employment, wages and inflation are headwinds the Australian economy is facing.

“High labour underutilisation and low productivity growth mean that wages growth is likely to remain at just over 2 per cent annually for the next two years, which will also keep inflation low. 

“Price discounting in the retail sector will also drag on inflation and underlying inflation is expected to increase slowly towards 2 per cent over the next three years, missing the RBA’s 2-3 per cent target band.” 

“Price growth for essential services like health, education and transport (that are often provided by the public sector) will continue to run above the rate of inflation,” Ms Mousina explained.

Finally, Ms Mousina said more stimulus is needed to help support the Australian economy, noting that moving planned tax cuts forward could stimulate the economy.

Fidelity’s global cross-asset investment specialist, Anthony Doyle, agrees, saying: “If you think about fiscal conservative, it’s political ideology is defined by small government, a balanced budget and lower taxes.”

In order to fix the Australian economy in the longer term, Mr Doyle advocated for fixing the supply side of the economy, to improve the production capacity, and remove red tape through structural reforms.

“The difficult environment the Australian economy currently finds itself in, there’s no quick fix,” Mr Doyle said.

About the author

Cameron is a journalist for Momentum Media's nestegg and Smart Property Investment. He enjoys giving Aussies practical financial tips and tricks to help grow their wealth and achieve financial independence. As a self-confessed finance nerd, Cameron enjoys chatting with industry experts and commentators to leverage their insights to grow your portfolio.

About the author

Cameron is a journalist for Momentum Media's nestegg and Smart Property Investment. He enjoys giving Aussies practical financial tips and tricks to help grow their wealth and achieve financial independence. As a self-confessed finance nerd, Cameron enjoys chatting with industry experts and commentators to leverage their insights to grow your portfolio.

Cameron is a journalist for Momentum Media's nestegg and Smart Property Investment. He enjoys giving Aussies practical financial tips and tricks to help grow their wealth and achieve financial independence. As a self-confessed finance nerd, Cameron enjoys chatting with industry experts and commentators to leverage their insights to grow your portfolio.

more on this topic

Salary

RBA's decision to hold cash rate steady impacts Australian hiring landscape

In a move that aligns with current labour market trends, the Reserve Bank of Australia (RBA) announced today that it will keep the cash rate unchanged. This decision comes after three consecutive rate ...Read more

Salary

Australian professionals face growing dissatisfaction despite job security, new report reveals

In a revealing insight into the current state of the Australian workforce, the Hays Salary Guide FY26/27 has unveiled a paradox: while many professionals feel secure in their jobs, a significant ...Read more

Salary

Hiring growth dips as businesses navigate tougher operating conditions

In a sign of shifting economic priorities, Australian businesses are showing increased caution in their hiring practices, according to the latest Employment Hero Jobs Report. The data, released in May ...Read more

Salary

Employment Hero unveils HeroForce to tackle Australia’s $12.6 billion employment admin burden

Sydney, Australia - In a significant move aimed at revolutionising the employment landscape, Australian-founded AI-powered platform Employment Hero has launched HeroForce, a new employment model ...Read more

Salary

Job market dynamics shift as ABS labour force data reveals underemployment concerns

The Australian Bureau of Statistics (ABS) has released its latest labour force data, sparking discussions about the current state of the job market. While the headline unemployment rate may appear ...Read more

Salary

Interest rate hike puts pressure on Australian businesses and consumer confidence

In a move widely anticipated by market analysts, the Reserve Bank of Australia (RBA) announced an interest rate hike today, a decision that has sent ripples through the business communityRead more

Salary

Labour market momentum continues as older Australians see wage growth

Australia's labour market is showing signs of sustained momentum, with a notable increase in hours worked alongside job growth, according to Ben Thompson, CEO and co-founder of Employment HeroRead more

Salary

Wage growth in SMB sector outpaces official figures, reveals Employment Hero

In a surprising revelation that challenges official statistics, the latest data from Employment Hero has highlighted a significant wage growth in Australia's small and medium business (SMB) sectorRead more