Research Briefing
23 Apr 2025
Uncertainty is the biggest threat to Australia’s growth this year
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We have downgraded our forecasts for Australia due to the major disruptions to the global economy caused by changes to US trade policy. We now expect growth of 1.8% in 2025 (down from 2.1%), and 2.1% in 2026 (from 2.5%). Australia’s direct exposure to higher US trade barriers is low. But weaker growth in major trading partners will be a negative shock to external demand.
- More importantly, the ‘liberation day’ tariff announcements and subsequent changes to policy have generated enormous uncertainty and higher risk aversion. We expect a pullback in business investment and hiring, which will compound a sharp fall in consumer sentiment. Although strong, these headwinds won’t derail the economy entirely in 2025.
- The fall in external demand will be disinflationary in the near term. Oil prices have already fallen sharply, making for weaker headline inflation in 2025. Moreover, a likely glut of exports coming from neighbouring economies that are worst affected by tariffs should exacerbate the current weakness in goods inflation.
Chart 1: We expect GDP growth of 1.8% in 2025

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