We live in an uncertain world and no-one can truly know what the future may hold, but here are three economic trends that I’m confident will emerge over the coming year.
1. Inflation to cool
Inflation has already come down from its peak at the end of 2022. It may, or may not, decline as quickly as the Reserve Bank would like but we can be confident that it will ease further over 2024. That will bring welcome relief from the cost-of-living pressures Australians have been facing.
2. Population surge to ease
The population surge that we saw over the last year or so since borders reopened after the pandemic likely won't be repeated in 2024. Foreign students have returned in their droves, visa backlogs have been cleared, while many other migrants have arrived having previously had their plans delayed by COVID.
In addition, the number of graduating students who had been studying in the country leaving and partly offsetting that inflow has been relatively low.
These trends are unlikely to continue with the same strength next year and, even without any policy changes, we expect population growth moderate to something closer to the averages of recent years.
The anticipated slowdown in population growth should help to ease some of the pressure in the housing rental market. In recent times, rents have been rising quickly and rental vacancy rates have been very low. As a result, some renters have struggled to find a suitable home. Over time, some of the pressure will abate, making it easier for people to find a home.
3. Climate transition to continue
From more electric vehicles on the road to increased investment in renewable power and the renewal of power grids here and overseas, the climate transition is continuing to gather pace.
There are many other things going on beneath the surface: for example, research into more advanced battery technology. There's also work being done to improve energy efficiency in the home and encourage more home automation so that energy usage better aligns with the peaks in renewables production.
Luci Ellis is Westpac’s economic spokesperson and is responsible for all of our economic research. She was previously Assistant Governor (Economic) at the Reserve Bank of Australia from December 2016 until October 2023. Prior to that, Luci was Head of Financial Stability Department at the RBA for eight years, spent two years on secondment at the Bank for International Settlements in Basel, Switzerland, and held several other senior positions at the RBA over a three-decade career in central banking. Luci has been a member of the Australian Statistics Advisory Council, the statutory advisory body to the Australian Bureau of Statistics, since November 2015. Luci holds a PhD from the University of New South Wales, a Masters in Economics degree from the Australian National University and a first-class Bachelor of Commerce (Honours) degree from the University of Melbourne.
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