The economy has struggled over the past 12 months, weighed down by high inflation, Reserve Bank hikes in official interest rates and an increase in general tax on working Australians.
Deloitte Access, in its pre-budget economic outlook, has forecast the economy to grow by just 1.7% through 2024-25 after growing 1.5% in the current financial year. Beyond that, it does not forecast economic growth to exceed 2.2 percent until 2027-28.
But he expects inflation to ease within the RBA's 2-3% inflation target next financial year, to 2.7%.
Deloitte partner and lead author of the report, Stephen Smith, said cost-of-living pressures were likely to ease over the next 12 months, but the economy would continue to struggle.
“The second half of 2024 will see the renewed Stage 3 tax cut and gradual improvements
in real wages, much to the relief of households,” he said.
“At the same time, growth prospects are clouded by fading business investment, a homebuilding sector that is spinning its wheels, and a global environment that is uncertain at best” .
University students, reeling from big increases in the indexation of their undergraduate debt, could get some relief in next month's Budget.Credit: Eddie Jim
The May 14 Budget will confirm the government's renewed Stage 3 tax cuts starting July 1, plus help for low-income earners and small businesses to cope with high electricity prices .
The government is under pressure to overhaul the indexation process for income-based loans for university students after a surge over the past two years due to high inflation. Teaching and nursing students undertaking unpaid work experience also struggle to cope with cost of living pressures.
Chalmers noted that both issues could be fixed next month.
“Whether it's HECS relief or support for trainees, trainees as they finish their degrees, we're looking at both of those things for the budget,” he said.
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The budget will also include key elements of the government's “future made in Australia” package, with Chalmers rejecting claims the extra spending on the policy would increase inflation.
He said the government was looking to support businesses to increase their investment in the country, which would help reduce inflationary pressures. The timing of the additional funding would also ensure that the program does not increase inflation in the short term.
“I think there's been quite a bit of rubbish said and written about the potentially inflationary impact of a Future Made in Australia. It's wrongly assumed that all the investment we're looking at comes into the economy at once at the top,” he said.
“We care not only about the quantity of investment, but about the quality of investment.”
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