In his June Economic Update, Bendigo Bank Chief Economist, David Robertson, has cautioned the Australian economy has become a high-stakes tightrope walk for decision makers, with a cooling jobs market, persistent inflation, and global energy uncertainty driving a significant deceleration in growth and a starkly changing property landscape.
The latest jobs, inflation and GDP data
“As we have been forecasting for many months now, we are seeing an expected slowing in the economy as three RBA rate hikes, high energy prices, and global uncertainty weigh on demand, with the jump in unemployment to 4.5% confirming that job growth is slowing,” Mr Robertson said today.
“Though headline inflation fell to 4.2%, core inflation rising to 3.4% and this week’s announcement of a 4.75% award wage increase will keep pressure on the RBA to maintain restrictive rates, especially given Australia’s lack of productivity growth.
“Looking ahead, economic growth is forecast to slow to 1.5%, dependent on the duration of the conflict in the Middle East and the resilience of household spending and labour markets,” Mr Robertson said.
Interest rates and global market drivers
While our prediction is official interest rates will remain on hold this month, in the absence of an immediate end to the Middle East conflict and a sharp, lasting fall in oil prices, one more rate hike is still expected this cycle, in November,” Mr Robertson said.
“After peaking at $125 a month ago, oil has returned to below US$100 per barrel. As financial markets continue to trend toward fresh record highs, the rise in petrol and diesel prices, alongside shortages in key inputs like fertilisers will continue to weigh on the economy. While household spending has held up thus far, this uncertainty, and cost-of-living pressures, has pushed consumer sentiment to a record low.”
Property market outlook and the federal budget
“The Federal Budget has been prominent in discussions about the outlook for the private sector, housing markets and sentiment more broadly, as proposed tax changes specifically targeting residential property are vigorously debated.
“Auction clearance rates were already declining leading up to the budget and are expected to slow further, suggesting capital city house prices will level off. Sydney and Melbourne are already seeing small declines, while other capitals, and regional property, have been more resilient. In contrast to the average 9% house price increases last year, 2026’s market may be closer to flat in many locations,” Mr Robertson said.
“This may well meet the government’s stated objective of helping with housing affordability, but arguably, there is more work to be done on supply, and the bigger economic issue is productivity.
“As we have argued here for many years, we do need bold structural reform including tax reform to lift productivity, so that higher wages growth can occur without feeding back into inflation. But, the jury is out as to whether this can all be achieved without adjusting GST, to lower our dependence on personal income tax,” Mr Robertson concluded.