Over the past few years, Australia has again proven to be relatively resilient to global economic shocks. Following five years of macroeconomic fluctuations resulting from the COVID-19 pandemic and its after-effects, the economy is returning to its pre-pandemic growth trend. Consolidating the budget, increasing competition, improving housing affordability and achieving longer-term climate goals would help sustain Australia's high living standards, according to a new OECD report.
The latest OECD Economic Survey of Australia says that GDP growth picked up from 1.1% in 2024 to 1.8% in 2025 and will improve further to 2.3% in 2026 and 2.4% in 2027. Consumer price inflation is projected to remain steady at 2.7% in 2026 before declining to 2.5% in 2027. The budget deficit widened to 3.4% of GDP in 2025 but should narrow to 2.8% in 2026 and further to 2.5% in 2027.
Real wages fell markedly from late 2021 through mid-2024 as nominal wage growth lagged behind inflation, weakening growth in household consumption. With inflation having fallen back, real wages are now recovering and consumption growth is picking up.
Safeguarding fiscal sustainability will require a sustained consolidation effort at both the national and state levels to curb existing deficits and address longer-term pressures such as costs related to health and long-term care. Improving spending efficiency and optimising tax revenues would help put public finances on a sound footing.
Competition has weakened over the past two decades, pointing to the need for more robust enforcement of competition law. Effective implementation of the revitalised National Competition Policy and measures that reduce regulatory fragmentation across states and territories and enforce competition law more vigorously and consistently would boost business dynamism and productivity growth.
House prices have risen strongly over the past 30 years, significantly more than in the average OECD country. Measures to reduce planning barriers and increase housing supply would improve housing affordability, particularly in major cities.
Carbon emissions, while still very high, are on track to reach Australia's 2030 target thanks to good progress in reducing emissions from electricity generation. Achieving longer-term objectives, including net-zero emissions by 2050, will require a strategy to cut transport and agricultural emissions as well.
See the full OECD Economic Survey of Australia.
