2 Jul 2024 | Blog

Quarterly Economic Update: April – June 2024


The economy continues to face headwinds, with persistent inflation, a newly unveiled federal budget causing ripples, and global events poised to exert significant influence.

Domestic and International Uncertainty Prevails

Current indicators suggest a climate of uncertainty both at home and abroad, making it improbable that inflation will settle within the desired 2-3 percent range in the immediate future.

While earlier projections anticipated inflation returning to target by late 2025 and reaching the midpoint by 2026, recent data paints a less optimistic picture. Weak economic activity is evidenced by sluggish GDP growth, rising unemployment, tepid wage increases, and unpredictable consumer spending patterns.

Global advanced economies are experiencing a deceleration, though glimmers of hope emerge from China and the US, alongside rising commodity prices. However, geopolitical tensions remain high, threatening potential supply chain disruptions.

Federal Budget Prioritises Social Initiatives

On May 14, 2024, Treasurer Jim Chalmers unveiled the 2024-2025 Federal Budget, aiming to address cost of living pressures without exacerbating inflationary trends.

Key budget highlights include:

  • Broad-based tax relief measures
  • Cost of living support through energy rebates, increased Commonwealth Rental Assistance, and a decade-long commitment to social and affordable housing
  • Substantial investment in the government’s Future Made in Australia initiative, with emphasis on clean energy and critical minerals sectors

Interest Rates Hold Steady, Future Uncertain

The Reserve Bank of Australia (RBA) maintained the cash rate at 4.35 percent throughout the quarter.

At the June board meeting, Governor Michele Bullock indicated that further rate hikes remain a possibility. The current rate will hold until the RBA’s next deliberation in early August.

Inflation Proves Stubborn

Despite a significant decrease from its 2022 peak, inflation continues to persist. The RBA anticipates a gradual return to the 2-3 percent target range.

Economic growth remains constrained as households curtail non-essential spending due to income pressures.

Consumer Spending Patterns Shift

Household expenditure on discretionary goods shows minimal growth, increasing by just 0.6 percent year-on-year. Conversely, non-discretionary goods and services spending rose by 5.8 percent, driven primarily by higher fuel and food costs. Health-related spending surged by 15.7 percent compared to the previous year, contributing significantly to the overall 3.4 percent increase in household spending in April.

China Eases Australian Export Restrictions

China has lifted bans on most Australian beef and other exports, marking a significant de-escalation of trade tensions. These restrictions, imposed in 2020, had cost Australian exporters approximately AUD 20 billion annually. With the removal of these barriers, less than AUD 1 billion worth of Australian exports now face impediments, a substantial reduction from the previous AUD 13 billion impact.

U.S. Political Landscape and Global Trade Concerns

Despite his conviction on 34 felony counts, Donald Trump’s presidential campaign continues unabated. As the November election approaches, economists express concern over Trump’s proposed 10 percent tariff on all U.S. imports. If implemented, such policies could potentially ignite trade wars, disrupt international commerce, and impact global economic growth.

The information contained on this website has been provided as general advice only. The contents have been prepared without taking account of your personal objectives, financial situation or needs. You should, before you make any decision regarding any information, strategies or products mentioned on this website, consult your own financial adviser to consider whether that is appropriate having regard to your own objectives, financial situation and needs.

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