Election result delivers some welcome certainty in Australia

The past month has been relatively quiet compared to the flurry of activity following the ‘liberation day’ tariff announcements in the US. At the margin, Australia’s wage and inflation outcomes have been very slightly stronger than expected, but not by enough to alter the outlook for growth or monetary policy. Our GDP growth forecast for 2025 is unchanged at 1.8%, followed by 2.1% in 2026.

• The recent improvement in US-China trade relations is a positive development for the global economy and will result in a slight upgrade to our forecasts in the coming month. However, the constant shifts in policy do little to ameliorate the heightened sense of uncertainty in the economy. This channel is likely to be more harmful to the Australian economy than direct trade disruptions.

• The Labor Party’s decisive federal election victory means Australia has avoided a minority government, which will give the economy some welcome certainty, which is otherwise in short supply. The election result has not altered our outlook materially, as the difference between the major parties’ economic policies is marginal at the macro level. Treasurer Jim Chalmers has signalled his second-term agenda will have a longer-term focus on productivity gains, a worthy but challenging goal.

Chart 1: We expect GDP growth of 1.8% in 2025