Australian Economy and CRE Trends - Q1 2025

Intensifying downside risks have become prevalent and dominate the outlook for the second half of 2025, amid escalating trade tensions and financial market adjustments. Global economic growth forecasts have since been revised downwards, largely reflecting reduced trade between U.S. and major trading partners.

Global headline inflation is expected to decline at a slightly slower rate relative to early-2025 estimates, reflecting ongoing U.S. tariff tensions. However, with trade conversations continuously evolving, we remain vigilant to both downside and upside risks shaping financial markets and economies.

Economic activity in Australia remains soft with Gross Domestic Product (GDP) growth recorded at 0.2% in the March 2025 quarter, marking the slowest rate of growth in 12 months. On an annual basis, GDP rose 1.3%, level with the prior quarter’s reading. Growth is expected to gradually improve as further potential interest rate cuts, anchored inflation, and positive real wage growth begin to flow through households and businesses. This is anticipated to lead to higher consumption and investment levels, albeit lifting from a low base.

Despite short-term economic headwinds, the medium to long-term outlook remains positive. Based on the latest data from Oxford Economics, Australia's population growth is projected to be the strongest among advanced economies, with GDP growth expected to be one of the strongest over the next 10 years.