Adding to this is the chatter around our central bank, which has been under pressure to cut rates, but has largely resisted this, choosing instead to keep the cash rate steady at 4.35% – a position it’s held since November 2023.

Reflecting on how the Aussie economy has performed in 2024 – and how it might fare in the following year, given various headwinds including a second Trump administration in the U.S. and a continuing slowdown in China – ANZ senior economist Catherine Birch contributed several thoughts on the outlook.

Starting with the recent GDP numbers, Ms Birch said it showed the impact high inflation has been having on Australia.

“We did see the slowest annual GDP growth in Australia outside of the pandemic, since the 1990s recession, and that does show the economy is really feeling it at the moment,” Ms Birch explained.

“We have seen inflation really be a challenge for the economy. That has certainly caused some challenges for many industries and parts of the economy: construction is a big one in particular.

“We know a lot of construction firms have really struggled with the sharp rise we’ve seen in input costs. And some of the supply disruptions have really constrained how much can really be done, and therefore limiting growth as well.”

In response to high inflation, the RBA had taken a tough line on rate cuts – and had received pushback for this. But Ms Birch said it’s important to remember Australia had differed from other countries in terms of its initial experience with inflation, and how the RBA had chosen to respond to this.

“We saw inflation pick up later, we saw it peak later, but it’s also been slower to come down as well,” she said.

“And one of the differences, not only in the timing of rate changes versus other central banks, is that the RBA took our cash rate to 4.35% – well below a lot of comparable economies.

“For example, over in New Zealand, their OCR peaked at 5.5%, we saw over in the US, the rates peaked at 5.25-5.5% as well.

“So one of the reasons the RBA did that was that they were willing to tolerate a slower return of inflation back to target with the benefit being that unemployment wouldn’t rise as much if they took rates even higher to try and get inflation back to target sooner.”

Indeed, evidence of a consistently resilient labour market in Australia seems to have justified the Reserve Bank’s actions.

Looking into the new year, it was likely that – unexpected data notwithstanding – the RBA’s cautious policy would be likely to continue.

“We’re expecting that the RBA will start to cut rates in May and that there will be only two 25 basis point rate cuts in this cycle – so getting down to 3.85% by August next year, and then staying there,” Ms Birch said.

“A lot of people might not want to hear that sort of forecast. It will depend quite a bit on the data as to when the cuts start.

“If we see inflation and labour market data and household spending becoming weaker than expected over the next couple of months, it’s possible that they may start to cut rates in February.”

Turning to global headwinds in 2025, Ms Birch said the key word guiding predictions for both the Australian dollar and commodity prices was ‘volatility.’

The former would be likely to drop in the first half of the year, influenced by the anticipated impacts of Donald Trump’s promised tariff policy.

“We think that we’ll be seeing, by the middle of 2025, the Aussie dollar at around 63 US cents, but potentially there are periods where it gets lower, closer towards the 60 cents mark,” she said.

However, Ms Birch added several variables would enable Australia’s economy to survive these headwinds, with the dollar moving back towards 67 cents in the second half of 2025.

“We think Australia is still relatively well placed compared to a lot of other economies in terms of our growth outlook, and also our ability to deal with any shocks coming up as well, so that room we have on the fiscal policy side and monetary policy side,” she said.

Geopolitical and global economic volatility would likely also retain the strength of gold as a safe haven, she added, while other commodities would be shaped by trends coming out of Beijing.

“We think about something like lithium – the oversupply in batteries that we’re seeing in China will likely limit the near-term outlook at least, but the longer-term outlook still looks really positive,” Ms Birch said.

“And then of course there’s the China story as well: With that slowdown, that structural weakness that we’re seeing in the property sector only being partly offset by some of the stimulus measures and the move towards those new productive forces.

“So more investment in renewables and things like EVs and green infrastructure. Now, those sorts of things should boost things like aluminium and copper and some supply disruptions in those metals should also protect any price downside.”

Join the discussion: See what’s trending right now on Australia’s largest stock forum and be part of the conversations that move the markets.

We set out to offer practical advice for those facing economic pressures.

The first step to tackling debt is consolidation.

By combining high-interest debt into a personal loan with a lower interest rate, you can save money and make payments easier to manage.

However, it’s important not to accumulate more debt—stick to a cash-covered system.

Reflect on how you ended up in debt.

Were your purchases necessary, or were they influenced by other factors like boredom?

By adjusting your spending habits, you can help prevent future debt.

Earning extra income through a side hustle can help you pay off your debt faster.

Even a few extra hours each week can make a significant difference.

Negotiating with your creditors for better terms can provide some relief.

Many institutions are open to working with customers during tough times, especially if you reach out early.

Be wary of store credit and balance transfer offers.

These can seem helpful, but they often lead to more debt if not managed properly.

Stick to a disciplined repayment plan to avoid falling into these traps.

For more Info about Money and Investing you can go to the podcast; The Wealth Playbook: Your Ultimate Guide to Financial Security; and, The Wealth Playbook on Audible.

Disclaimer: Wealth Magnet Pty Ltd (ABN 52 618 868 830) trading as Australian Investment Education is a Corporate Authorised Representative (CAR no. 1255231) of Grange Financial Services Pty Ltd (AFSL No. 488609).

The material provided in this article is for information only and should not be treated as investment advice.

Viewers are encouraged to conduct their own research and consult with a certified financial advisor before making any investment decisions. For full disclaimer information, please click here.

We kick off by discussing the significance of identifying market phases – from long-term bull and bear cycles, to fundamental economic shifts.

Learn the essential skill of reading the tape to navigate volatile markets effectively.

We compare current market conditions to past cycles, focusing on the implications of factors like interest rates and corporate earnings.

We also touch on market peaks, as well as strategies for knowing when to buy or sell.

We explore trends within the market, and in particular short-term opportunities used by skilled traders.

Get practical advice on trading trends versus long-term investment strategies.

Finally, we consider the broader economic landscape, including the potential impact of the upcoming US election. We also look at global factors such as China’s economic growth on market cycles.

For more Info about Money and Investing you can go to the podcast at http://www.moneyandinvesting.com.au/; The Wealth Playbook: Your Ultimate Guide to Financial Security: https://www.wealthplaybook.com.au/, and The Wealth Playbook on Audible: https://www.audible.com.au/pd/The-Wealth-Playbook-Audiobook/B0CXYYWZTB?qid=1711282387

Disclaimer: Wealth Magnet Pty Ltd (ABN 52 618 868 830) trading as Australian Investment Education is a Corporate Authorised Representative (CAR no. 1255231) of Grange Financial Services Pty Ltd (AFSL No. 488609).

The material provided in this article is for information only and should not be treated as investment advice. Viewers are encouraged to conduct their own research and consult with a certified financial advisor before making any investment decisions. For full disclaimer information, please click here.

This was the bad news aspect of the Australian Bureau of Statistic’s release of GDP data for the June quarter, which revealed that for that period, economic growth was at 0.2% – a figure which represented eleven consecutive quarters in the green, and the same reading as for the March quarter of this year, and 2023’s December quarter.

The June quarter figure was largely in-line with expectations.

However, the consistently weak readings across several months has caused a pulling-down effect on the annual data, with the ABS saying that between June 2023 and June 2024, the Australian economy grew by only 1%.

ABS head of national accounts Katherine Keenan acknowledged this in her commentary following the data release.

“The Australian economy grew for the eleventh consecutive quarter, although growth slowed over the 2023-24 financial year,” she said.

“Excluding the COVID-19 pandemic period, annual financial year economic growth was the lowest since 1991-92 – the year that included the gradual recovery from the 1991 recession.”

Also concerning was the number for growth on a per-person basis – which was down by 0.4%, representing the sixth consecutive quarter in the red.

Household demand is unsurprisingly the main factor underpinning this data, with this detracting 0.1 percentage points from GDP growth, while government consumption added 0.3 percentage points – the same contribution as seen in the previous quarter.

The latter represented continued strength in social benefits to households, while weak discretionary spending was the cause of falling household demand.

Indeed, household consumption – which fell by 0.2% in the June quarter – was at its weakest growth rate since the September quarter of 2021, impacted by the Delta-variant lockdown.

Discretionary spending was down 1.1%, following a rise in March. 

Spending on essential grew however by 0.5% during the June quarter, influenced by rent and other dwelling services expenses, as well as fuel costs – where spending was up 2.4% due to a reduction in rebates which had been provided during the quarter, and increased need for heating.

Food spending was down 1% as people turned to less expensive options.

Saxo Head of FX Strategy Charu Chanana said the readings were not the market’s main focus for today, but still something to watch.

“Today’s Aussie GDP data isn’t enough to take the focus away from global risk-off activity,” she said.

“There’s a curious case here as to how long the Australian economy can avoid a slowdown if global growth is headed lower.”

The latter certainly appeared to be the market’s interpretation, as the ASX200 moved up sharply by 1% on the news.

On a surface level, the data was on-target with expectations, as the CPI rose 1% quarter-on-quarter, in addition to a year-on-year increase of 3.8% – the latter marking first time it had risen since late 2022.

The mean figure for the June quarter sat at 3.9%, a trim back from March’s 4.0%. This was slightly higher than the RBA’s expectations of 3.8%, but lower than market expectations which had placed it at 4.0%.

Tradeables registered a rise of 1.2% compared to the previous quarter, and this was somewhat surprising, given the earlier trend of inflation softening for this goods category based on weaker consumer demand and supply disruptions being resolved.

However, it appeared that rising costs in food, clothing and fuel during this period had reversed the trend, at least for now.

For non-tradeables – which remained steady at 5.0% quarter-on-quarter – housing was still the main story, as very low vacancy rates translated to rental prices remaining high, with a rise of 7.3% over 12 months to the June quarter, although this was down from 7.8 per cent in the March quarter.

Head of Macroeconomic Forecasting for Oxford Economics Australia Sean Langcake said that inflation pressures connected to rents and new housing construction were likely to remain strong – albeit with some relief from expansion of Commonwealth Rent Assistance, which should show up in the Q3 figures.

However, he said softening in other parts of the non-tradeable category could indicate a weakening in core inflation outside of housing – and predicted that the Reserve Bank of Australia (RBA) would keep rates on-hold next week, although the possibility of a later hike was still in the offing.

“This is a challenging print for the RBA, and leaves the August policy decision finely poised,” Mr Langcake said.

“Headline inflation is in line with the forecasts presented to the board in May, which suggests the economy is still on the path the RBA anticipated three months ago.

“But inflation pressures remain broad and persistent, and there is still a strong case for tighter policy.”

Saxo Head of FX Strategy Charu Chanana also expected rates to remain on hold, although she warned that the RBA’s more cautious actions up to now in comparison to other central banks still allowed scope for later hikes.

“The softer inflation print would be a relief, and takes the pressure off the RBA to hike rates,” she said.

“The AUD could (now) have room to extend its slide lower against the USD and NZD – however, it is worth noting that expecting rate cuts from the RBA may still be premature.

“Jobs growth and retail sales remain strong, and the RBA has raised rates by less than other G10 central banks. This means dip-buyers could potentially come in if AUD/USD slips towards its support level at 0.6465.”

Speaking to the media after Tuesday’s decision to keep the cash rate on hold at 4.35 percent, RBA Governor Michele Bullock said recent data – including retail sales released on the same day – had indicated the inflationary dangers were still present, meaning the central bank could not rule out a ‘bumpy’ road ahead to keep the economy on track.

“We have made progress here, and we’re not going to jeopardise that,” Ms Bullock said.

“The rise in interest rates that has been required to bring down inflation has been painful to many people. Inflation though, as I’ve said before, is bad for everyone and we have to see the job through.”

Data from the Australian Bureau of Statistics on Tuesday showed retail sales volumes remaining in decline, but prices rising 0.6 percent quarter on quarter in the first three months of this year.

Ms Bullock said getting inflation back to target would take time, but that the board believed this would be possible to achieve by next year.

The RBA increased the cash rate by 0.25 percent in October last year, from 4.10 to 4.35 percent, where it has remained ever since, with four successive decisions to keep it on hold. The decision to keep rates at the same level again on Tuesday was broadly expected by economists, with only minor predictions of another hike.

Governor Bullock noted the varied experiences of Australian households in navigating the current economic situation.

“On the one hand, there might be people who are managing to save despite high inflation and interest rates – in fact, some of those with mortgages are still making extra payments into offset and redraw accounts on top of their required payments,” she said.

“But on the other hand, we also know there are households that are really struggling to make ends meet: these people don’t have a lot of extra savings, they might be working a second job, cutting back on discretionary items, making difficult decisions such as putting off medical appointments.

“These people are doing it very tough, and we are conscious of this. One of the outcomes of this is that household consumption is very weak: we can see that in the retail figures from last week.”

Wading through this, the RBA needed to maintain its focus on reducing inflation while also keeping employment growing, Ms Bullock added.

“This is the difficult path that we are trying to navigate,” she said.

“Right now, we believe that rates are at the right level to achieve this: but there are risks, and at this stage the board is not ruling anything out.”

The Hong Kong bourse fell 2.6 percent by afternoon trade after Premier Li Qiang announced there would be no significant government stimulus to boost the Chinese economy, which has been experiencing turmoil due to property sector crisis, local government debt, and deflation.

Premier Li delivered this news as part of the Government Work Report at the NPC, which this week is running concurrently with another key economic policy meeting, the Chinese People’s Political Consultative Conference (CPPCC).

The NPC and CPPCC are collectively known as the ‘Two Sessions’ and are crucial events for investors seeking clues as to where the Chinese government will be putting its economic focus.

Another crucial announcement from the Premier was targeted growth for the Chinese economy in 2024, which was set at an optimistic 5 percent, the same figure as last year.

This matched Chinese economists’ expectations, although international economists had expected a slightly weaker growth figure of either 4.5 or 4.6 percent, citing the aforementioned economic headwinds, which have caused significant short positions and weakened investor sentiments.Saxo Chief China Strategist Redmond Wong noted some divergence between the Hang Seng sell-off and the mainland A-share market, which remained relatively stable after the announcement. “In contrast to the Hong Kong market, the mainland A-share benchmark indices displayed a more resilient performance following the delivery of the Government Work Report on Tuesday,” Mr Wong said. However, he added that the “Government Work Report and the outcome of the first day of the NPC meeting aligned with general expectations, offering no significant positive surprises.”Other announcements from the Work Report included a predicted fiscal budget deficit of 3 percent of GDP for 2024, and an increase in 1.1 trillion yuan bond issuances (this being the first such sale since 2020), which is set to provide extra funding to strengthen infrastructure investments.

Mr Wong said the Report had yielded some indications of China’s economic commitment to industries like advanced manufacturing, artificial intelligence, green energy, and quantum computing, adding that more detail on this would become clear throughout the week. “The emphasis on high-quality development, as highlighted by President Xi Jinping, underscores China’s commitment to industrial policies fostering technological advancement and innovation,” he said.

“Investors eagerly await insights into these policies during the upcoming press conference, where key officials will address questions and provide details on China’s industrial strategies, plans, and financial system reforms. “Of particular interest is the assessment of the regulatory environment of China’s equity market by the new CSRC Chief, Wu Qing, adding a layer of significance to the unfolding events in China’s economic landscape.”On Tuesday, China announced a 10 percent increase to its annual budget for science and technology, which rose by 10 percent to an unprecedented 370.8 billion yuan ($51.6 billion).