Recent strength proves more enduring than expected

We’ve been cautious about prematurely celebrating the good news in the Aussie economy. But after a run of strong household spending prints and a labour market that keeps chugging along, we’re starting to change our tune. In turn, our November baseline forecast for 1.7% growth this year is likely too pessimistic; assuming the recent strength is maintained over the next two weeks, we’ll nudge up our outlook in the December baseline. Next year, the economy is set to jump 2.1%, buoyed by our upgraded household spending profile.

• The better Aussie outlook comes alongside improved global growth and an upgrade to our China outlook. We lifted our 2026 China GDP growth forecast by 0.2ppts to 4.3%, reflecting the recent US-China trade truce and the growth-forward 15th Five-Year Plan.

• Despite the good news in the Aussie economy, our earlier caution was warranted. Business investment is floundering as firms continue to second-guess spending plans. The recent public-sector spending bonanza is also tailing off, meaning private demand will have to step up to fill the void. While businesses remain hesitant to do so, households appear increasingly willing.