Deloitte Access Economics Business Outlook

01 OCTOBER 2025: Green shoots are appearing in the Australian economy, with falling inflation, real wage gains and stronger household spending hinting at a long-awaited recovery. But an economic spring is far from guaranteed. To preserve living standards in an increasingly turbulent global environment, Australia must double down on reform, beginning with turning the Economic Reform Roundtable into an annual fixture.

Releasing the September 2025 edition of the flagship Business Outlook report, Deloitte Access Economics Partner and report co-author Cathryn Lee said: “For all the hardship Australians have endured since the pandemic, there are now tentative, early indications that the economy is finally emerging from the challenges of recent years.

“That does not suggest that boom times are ahead. Those green shoots point to growth, but it will remain a grinding and gradual recovery. Deloitte Access Economics’ forecasts in this edition of Business Outlook anticipate Australian economic growth of 2.2% per year, on average, over the next decade. That compares to average annual growth of 3.3% recorded over the three decades prior to the pandemic.

“Slower economic growth is not just an Australian story. Since the beginning of this century, global economic growth has been below 3% on just seven occasions. Over the coming decade, Deloitte Access Economics does not expect global economic growth to exceed 3% in any year.”

“The challenges facing the global economy are enormous. Several decades of progress knitting together complex supply chains designed to reduce cost for the benefit of consumers is being disrupted. Populations are ageing and birth rates are plummeting, yet most government budgets are ill-prepared for the consequences. High levels of debt, modest wage growth and surging asset prices are worsening an existing societal divide.

“A small open economy such as Australia has always been at the mercy of the prevailing global economic conditions of the day. It just so happens that the global economy today is a world of worry.”

Australian economic growth recorded a welcome upturn in the most recent data, with households now doing more of the lifting. However, temporary factors flattered the June quarter result after Cyclone Alfred and other weather-related outages at major mines depressed activity in the March quarter.

Deloitte Access Economics forecasts real GDP growth of 2.0% in 2025-26, accelerating to 2.2% in 2026-27 as interest rates and rising real wages add to household incomes while government spending continues to support the economy. In the absence of increased business investment, this momentum is unlikely to be long-lived.

Deloitte Access Economics Partner and report co-author Stephen Smith said: “Rate cuts have been central to improving household spending. A single 25 basis point interest rate cut is worth nearly $1,700 a year for the average new borrower. We expect real household spending growth to improve from the 1.0% recorded in the 2024-25 financial year to around 2.5% in both 2025-26 and 2026-27, comfortably faster than broader economic growth in those two years.

“Supporting this scenario is a predicted further 25 basis point cut by the Reserve Bank of Australia (RBA) at its meeting in December, followed by two more in 2026. These moves, alongside real wage gains from a resilient labour market, should continue to support household cash flows and spending capacity.

“However, the rate-cutting cycle will eventually end and employment growth, heavily supported by government spending in recent years, is already slowing.”

Cathryn Lee added: “A lift in private sector activity will ensure the economic recovery doesn’t run out of steam as the rate-cutting cycle draws to a close in 2026 and budget-constrained governments pull back on spending growth.

“Per capita GDP, adjusted for inflation, is finally growing as real incomes lift. That has improved confidence and supported spending. However, Deloitte Access Economics expects that this measure of Australian living standards will remain below the level implied by the pre-pandemic trend for the best part of the next decade.

“With population growth slowing and the terms of trade unlikely to remain elevated, future prosperity hinges on encouraging businesses to invest more. The Economic Reform Roundtable showed there is no shortage of ideas, but waiting until 2028 to act on tax or investment reform would be too late.”

The Roundtable should go around again. And again.

The September edition of Business Outlook also outlines Deloitte Access Economics’ view that the recent Economic Reform Roundtable should be an annual event, elevating the tone of political debate and forcing policymakers to keep the focus on Australia’s future.

Stephen Smith said: “After months of anticipation and three days of spirited and mostly civil debate, the government’s Economic Reform Roundtable is now in the rear-view mirror. Its legacy as a success or otherwise will depend on the yardstick used to measure it.

“Those hoping for a major breakthrough or policy compromise were left underwhelmed. Many economists felt the Treasurer’s pre-Roundtable edict that only ideas with ‘consensus’ support would be considered was far too restrictive. Almost any meaningful economic reform creates both winners and losers, making true ‘consensus’ impossible.

“As so often happens, though, economists underestimated the guile and cunning of politicians.”

In his closing remarks following the Roundtable, the Treasurer highlighted several tangible policy steps, including changes to road vehicle charges and moves to cut government red tape. Further action followed shortly after the Roundtable discussion, with the announcement that the government will abolish a further 500 nuisance tariffs. While welcome, these initiatives are modest in scope – helpful at the margin but unlikely to meaningfully shift the dial on productivity growth.

Smith continued: “On bigger picture measures, there was recognition of a range of priority areas that Australia needs to tackle. These include the need for tax reform, better and more efficient regulation, and policies to encourage greater investment. The Treasurer noted these, among other ideas, in his ten areas of consensus that will help set the reform direction for the government over coming months and years. Yet detail on what those specific reforms might look like and the timelines for change remain scarce.

“By claiming consensus support on broad issues, the Treasurer has awarded himself considerable leeway on the policy detail. So much so, in fact, that the government arguably now has a mandate for change across a host of important domains.”

Another outcome to be viewed optimistically was the general recognition of the rising scourge of intergenerational inequality in Australia.

Smith said: “The health and wealth of young people in Australia relative to their forebears is a significant and worsening issue. Efforts to arrest and correct that trend make for good policy. They also happen to make for good politics – something that was not previously the case.

“On Deloitte Access Economics’ numbers, the 2025 election was the last in which the combined voting power of Builders, Boomers and Gen Xs outweighed that of Millennials, Gen Zs and Alphas. By the time of the next election in 2028, the younger generations will hold the majority.

“This demographic ‘tipping point’ is an example that the job of reform is never complete. It cannot remain dormant for long periods, nor be ‘set and forget’, nor be driven by ideology. And there is no single individual or group who have a monopoly on good ideas.

“In that context, a regularly convened Roundtable which hashes out policy concerns, reform options and the best response to Australia’s economic and social issues would be valuable.

“If that becomes the Roundtable’s lasting legacy – shifting Australia’s political culture so that civil, constructive and forward-looking discussions are not the exception but the expectation – then perhaps its greatest reform was not economic at all, but democratic.”

Key forecasts: Deloitte Access Economics Business Outlook, September Quarter 2025

Business Outlook is a quarterly publication presenting detailed economic forecasts and commentary to help understand the economic forces shaping the business environment. The forecasts cover a detailed assessment of the national economy, world growth prospects, each of Australia’s states and territories, and industries.