The global economic landscape is evolving, with growth projections on the rise and geopolitical risks looming large. Ausbil chief economist, Jim Chronis, shared his insights on the current economic trajectory and what lies ahead for Australia.
According to Chronis, the global economy is set to see growth at 3.3% in 2024, with the US leading the way. Europe is in a recovery phase, while China is focused on expansionary fiscal policies to boost growth. However, geopolitical risks, such as the Ukraine-Russia conflict and tensions in the Taiwan Strait, pose significant uncertainties.
In Australia, the outlook remains positive, with growth projected at 2% in 2024 and 2.5% in 2025. The country is expected to benefit from China’s fiscal policies, driving demand for commodities and strengthening the Australian dollar. Chronis also anticipates one rate cut in 2024, followed by another in 2025, as inflation remains above the 2% target.
However, risks to this outlook include persistent inflation, which could delay further rate cuts and impact consumer spending. The key lies in improving productivity and wages to bring inflation back to target levels. Chronis emphasized the importance of data in determining the timing of rate cuts, both in the US and Australia.
Overall, Chronis remains optimistic about the US economy, expecting continued growth and a soft landing in 2024 and 2025. This strong performance is likely to have a positive impact on Australia, with the potential for an elongated business cycle and steady growth ahead.
In conclusion, the evolving global economic landscape presents both opportunities and challenges for Australia, with a focus on managing inflation, interest rates, and geopolitical risks to ensure continued growth and stability in the years to come.