Australia on the path to economic recovery with rising consumer sentiment and falling inflation
Australia is experiencing rising consumer sentiment and an increase in dwelling approvals over the past 10 months, indicating positive economic recovery despite some potential short-term job creation slowdowns.
Consumer sentiment is also on a clear trend higher, even if there are odd bouts of monthly volatility in how we consumers are feeling.
Australia is getting on the right track
It might come as a surprise to many, but the number of new dwelling approvals have been increasing for 10 straight months with housing construction set to enjoy better times in 2025 and 2026.
The government policy to fast-track rezoning and approvals for housing developments is starting to kick in in what is a critical trend towards providing the new housing supply needed to meet demand.
The rate of job creation remains solid and the unemployment rate remains remarkably low.
At 4.0 per cent, the unemployment rate has been broadly steady for the best part of a year and it remains just half a percentage point from being at a 50-year low.
While the forward indicators for labour demand point to a slowing in job creation and some rise in the unemployment rate in the near term, it is unlikely to exceed 4.5 per cent in the current cycle before the stronger economy rekindles demand for workers.
The big news story is the sharp fall in inflation from the peak of 7.8 per cent reached at the end of 2022.
The December quarter data showed inflation at just 0.2 per cent for the second consecutive quarter, for an annual rise of 2.4 per cent. This is effectively in the middle of the RBA 2 to 3 per cent target band.
What's more, the trimmed mean inflation rate is falling - it rose by just 0.5 per cent in the December quarter.
Inflation is back on track due to the earlier interest rate hikes, global disinflation pressures and an easing of supply chain problems that were evident during the COVID-19 pandemic.
