Real GDP growth

IBISWorld forecasts real GDP to increase by 2.1% in 2025-26, to $2.69 trillion. Household consumption expenditure is expected to rise thanks to rising real wages. Private demand, particularly household consumption, is expected to increase thanks to rising real wages, which will support real GDP growth. As federal and state governments grapple with high debt levels, a shift towards private-sector-driven growth is anticipated in 2025-26. According to the Reserve Bank of Australia's (RBA) November 2025 Statement on Monetary Policy, inflation has increased above the 2-3% target band. The expiry of household energy rebates has bolstered electricity prices, contributing to headline inflation climbing to 3.2% in the September 2025 quarter. This situation highlights the persistence of inflation and its potential to exert downward pressure on real GDP.

Real GDP growth rebounded strongly from the pandemic-related declines, buoyed by high levels of government stimulus and the gradual easing of pandemic-related restrictions on movement. Fiscal assistance schemes, such as the JobKeeper and JobSeeker stimulus packages, have led to a rebound in economic activity and growth. In 2021-22, pent-up demand and the lifting of border closures and state-wide lockdowns drove sharp growth in real GDP as household spending and merchandise trade soared. Federal and state governments also announced infrastructure investments, including renewable energy projects that supported real GDP growth over the past five years. However, a steep rise in inflation during the 2022 calendar year and a corresponding increase in interest rates have weighed on real GDP growth, especially as cost of living pressures led to consumer sentiment plummeting. Capital expenditure on private dwellings fell over the period, thanks to declines in residential construction activity and dwelling commencements stemming from supply chain issues and subsequent rise in interest rates.

Despite troubles in the domestic economy, especially in the construction sector, other segments of the economy boomed amid a global rise in prices for particular commodities. Export opportunities for agriculture and mining firms surged as a combination of rising demand and surging prices allowed for a surge in the value of merchandise trade exports. Strong commodity export volumes in agricultural exports were helped by high levels of rainfall, resulting in multiple bumper crops in the two years through 2022-23. High prices for commodities, such as wheat, coal and gas, which were primarily driven by the Russia-Ukraine conflict, also supported the value of exports in the two years through 2022-23. More recently, prices have eased, which has led to successive declines in the value of merchandise exports over the three years through 2025-26. Moderating commodity prices and persistent inflationary pressures have also curbed real economic growth in the two years through 2024-25. More recently, the Federal Government's Stage 3 tax cut, which came into effect in July 2024, and looser monetary policy have supported private demand, causing it to support real GDP expansion. Overall, IBISWorld forecasts real GDP to grow at a compound annual rate of 2.5% over the five years through 2025-26.