Australia maintains a strong and largely sustainable economic foundation, characterized by high per-capita wealth, robust governance, and a favourable fiscal position, though it faces ongoing challenges related to inflation stabilization and climate goals.
Economic Performance and Standing
Australia boasts the second highest GDP per head among G20 nations when measured at market exchange rates. Recent data shows a significant acceleration in growth, with GDP expanding by 2.4% at an annualised rate in the second quarter of 2025. This marked a sharp improvement from the 1.0% growth recorded in the first quarter. Overall GDP growth for 2025 is expected to rebound following export-related weakness in 2024 (when annual growth was just 1.0%).
Inflation and Monetary Policy
CPI inflation has fallen markedly, declining from a high of 7% at the start of 2023. It currently sits at the bottom of the Reserve Bank of Australia’s (RBA) 2–3% target range, though it remains at the top of the range when measured by the trimmed mean measure.
In response to these conditions, the policy rate was cut to 3.60% in August, a level assessed as appropriate given the inflation target and current growth prospects. Private sector credit is showing a decline, falling from a peak of almost 200% of GDP, although money growth has picked up recently.
Fiscal and External Positions
Australia's fiscal position is sustainable. Government debt stands at around 50% of GDP and is forecast to be broadly stable over the next five years.
The external position is also considered sustainable, indicated by a small current account deficit. However, it is noted that Australia does have quite high net foreign liabilities.
Demographics, Governance, and Emissions
Demographics show continued population growth is expected, with the population in the crucial 15–64 age range holding up over the next 25 years.
In terms of Governance and Competitiveness, Australia is highly regarded. It holds the top rank in the G20 for economic freedom. The country is also ranked highly on overall competitiveness and is noted as "clean" in terms of corruption perceptions.
A key challenge remains with Emissions. Australia has relatively high emissions and is currently not on track for net zero by 2050.