Australia: the lucky country

Australians have a reputation for being pretty straight talking. The country's central bank, the Reserve Bank of Australia, fits that stereotype. In its November 2024 review of the state of the economy it states clearly "Inflation is still too high because demand is still too strong; the labour market is expected to remain tight and inflation is expected to take longer to return to target". Such forthrightness could helpfully be emulated by other central banks.

Activity has held up, with GDP growing at an annualised rate of 1.3% in the third quarter of 2024. But inflation remains sticky on both the headline and core measures (2.8% and 3.1%, respectively). Those rates are at the top of the long-standing (since 1993) inflation target of 2-3%.

The consensus view is that central bank rate cuts will not occur until 2025.

Structurally, Australia has great strengths: notably, it is the second highest ranking G20 economy in term of competitiveness; it is the freest of the G20 economies on the Heritage Foundation assessment; and perceived corruption is low. Relations with China are thawing, which will help support growth. The lucky country is going through a slightly more difficult patch, but is still fortunate.