economic slowdown Expected as Household Spending Cools

Household spending will likely slow as unemployment rises, wage growth moderates, and global uncertainty persists. This assessment suggests a cautious outlook for consumer activity.

Oxford Economics forecasts real per-person spending will increase by only 0.8 percent. Don’t expect consumers to fully regain confidence and significantly increase spending until late 2026 and into 2027.

Queensland and Western Australia are predicted to remain economic powerhouses,with gross state product growth of 2.4 percent and 2.3 percent respectively in 2025-26. These states will continue to support the national economy.

Victoria’s economy is expected to grow at 1.9 percent, while New South Wales will likely be the slowest growing state at 1.4 percent. The slowdown in both states is partly due to the completion of major infrastructure projects, like metro rail in Sydney and Melbourne.

Infrastructure projects are winding down, so the focus is now on households. They are slowly increasing spending as real incomes improve.

The recovery of household spending in Victoria and NSW – states with the largest mortgages – depends on further action from the Reserve Bank. Rate cuts earlier this year have provided some relief, but more may be needed.

Expectations for further rate cuts increased after recent employment figures revealed a four-year high jobless rate in September. This week’s inflation report will be closely watched to gauge price growth over the last quarter.

Oxford Economics anticipates unemployment will continue to rise.