Australia's economic growth forecast cut to sub‑2% amid slower productivity

Deloitte Access Economics has revised its outlook for Australia, lowering the forecast for 2026‑27 GDP growth from 1.9% to 1.3%. The firm warns that the country is on track for its longest period of sub‑2% growth since the early 1990s recession, with annual growth projected to stay below 2% for the next two financial years.

Inflation is expected to hover around 4% through 2026‑27 before easing to about 2.6% in 2027‑28, while the unemployment rate is projected to average 4.9% and could peak at 5% in the following year. Deloitte attributes the slowdown to higher interest rates, an oil‑price shock linked to Middle‑East conflict, the war against Iran, and years of insufficient investment in housing, infrastructure, energy and productive capacity.

The Reserve Bank may raise the cash rate to roughly 4.6% at its August meeting, although markets are pricing in potential cuts later in the year. Regional growth varies, with Western Australia forecast to slow to 0.7% while other states remain near 1.3‑1.7%. Deloitte notes modest upside from increased spending on data centres and technology, but household cost‑of‑living pressures remain a major concern.