Incoming slowdown for Aussie economy

Yasmine Raso

Senior Journalist, Financial Newswire

27 March 2023

New figures from GlobalData have forecasted a 1.8 per cent economic slowdown for Australia, but the nation has worked to lock in multiple trade opportunities to boost growth across sectors.

While the data said Australia’s economy growth, which rose by 3.7 per cent in 2022, is expected to slow to 1.9 per cent in 2023, the Macroeconomic Outlook Report: Australia found that the enforcement of an Indo-Pacific trade agreement could boost the economy.

The Regional Comprehensive Economic Partnership (RCEP) and the ASEAN-Australia-New Zealand Free Trade Agreement (AANZFTA), which is expected to be signed in late 2023, will bring new agricultural, mining and trade opportunities and grow the exports share in GDP from 25 per cent in 2021 to 32.3 per cent in 2025.

“To reinforce economic activities, Australia has undertaken several development projects that are expected to significantly boost construction and allied activities and create jobs opportunities,” Indrajit Banerjee, Economic Research Analyst at GlobalData, said.

“On the flip side, high inflation in Australia remains a key impediment to the economic growth prospects. The inflation rate rose to 7.8% in Q4 2022, the highest since Q1 1990, driven by 9.2% rise in food prices which was highest since Q3 2006. The inflation rate is projected to ease to 5.4% in 2023, which is much higher than the central bank’s target of 2-3%.

“Rising tourist inflows, regional agreements, and growing demand of lithium, copper, and nickel (leading producer) are expected to aid the economic growth prospects of the Australian economy over the next decade.

“Although China (largest trading partner) adopted a plan to reduce its dependency on foreign resources, the recent trade agreements with other APAC nations will keep the external sector of Australia buoyed.”

Current projects in Australia include AUD $17.9 billion-railway infrastructure, the M12 motorway worth $2 billion, and the rail link to Melbourne airport worth over $5 billion, which have allowed skilled foreign workers to fill the resource and job opportunity gaps.

“In terms of sectors, financial intermediation, real estate, and business activities contributed 22.3% to the gross value added (GVA) in 2022, followed by the mining, manufacturing, utilities (21.2%), and the wholesale, retail, and hotels sector (9.9%),” according to GlobalData figures.