global forecaster’s warning for Australia as NSW growth languishes

“Meanwhile, household spending appetite will decline as unemployment rises, real wage growth moderates and global uncertainty clouds the outlook.”

Oxford believes real spending per capita will rise by 0.8 percent. Consumers are unlikely to gain full confidence in spending until late next year and into 2027.

At the state level, Oxford forecasts Queensland (gross state product growth of 2.4 per cent in 2025-26) and Western Australia (2.3 per cent) will continue to support the economy.

Victoria’s economy is expected to be the third strongest with growth of 1.9 per cent, while NSW is expected to grow the slowest at 1.4 per cent. Both economies are trending towards a slowdown, in part due to the completion of mega infrastructure projects such as metro rail projects in Sydney and Melbourne.

“With infrastructure pipelines past their peak, the baton has passed to households, which are slowly returning to spending as real incomes rise,” Oxford said.

The recovery of household spending in Victoria and NSW, which also has the country’s largest mortgage debt, will depend on whether the Reserve Bank continues to ease monetary policy after three interest rate cuts so far this year.

Expectations for cuts rose after lower-than-expected employment figures showed the unemployment rate in September was at its highest level in four years. Economists expect this week’s inflation report to show price increases have increased over the past three months.

Oxford expects unemployment to continue rising and points out that the increase in youth unemployment, which rose from 8.9 percent to 10.5 percent in March, is a sign of a slowdown in the labor market.

Higher-than-expected inflation does not necessarily mean that the Reserve will oppose a rate cut.

In the USA, where the Federal Reserve’s inflation target is 2 percent, inflation rose to 3 percent. But financial markets expect the Fed’s monetary policy committee to cut interest rates by a quarter point later this week, taking America’s key lending rate to 3.75-4 percent.

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AMP deputy chief economist Diana Mousina said the Reserve was likely to make cuts if headline inflation rises by 0.8 per cent in the September quarter and the annual result rises to 2.7 per cent.

“If the figures are in line with our forecasts, we expect a rate cut in November, given the downside risks in the labor market. However, the decline in inflation will also be important to see whether higher inflation occurs in demand-driven parts of the economy,” he said.

Events in the USA continue to overshadow the global economic outlook. Over the weekend, President Trump announced that the Ontario provincial government would impose a 10 percent tariff on imports from Canada, America’s largest trading partner, following a television ad that featured images of former President Ronald Reagan supporting low tariffs and free trade.

Treasury secretary and Reserve Bank board member Jenny Wilkinson said in her department’s annual report that Australia’s economy had shown “resilience” in the face of global trade tensions and ongoing conflicts in regions such as the Middle East and Ukraine.

“The global economy potentially faces its longest period of below-average growth since the early 1990s,” he said.

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