Forecasts for long-term economic growth slashed

By the Editorial Team · Wednesday, July 8, 2026

Australia’s economic growth forecast has been downgraded, with projections now showing slower expansion of around 1.3 percent in 2026-27 and persistently high interest rates through late 2027. The revised outlook highlights structural weaknesses such as underinvestment in key sectors and reliance on population growth, signaling challenges for sustainable long-term growth.

Australia’s economic growth outlook has been sharply downgraded, with forecasts indicating an extended period of subdued expansion and elevated interest rates that may persist until late 2027. The latest June 2026 Business Outlook from Deloitte Access Economics reflects a significant revision of growth expectations amid ongoing domestic and global challenges.

The report cuts the forecast for real economic growth in 2026-27 to 1.3 percent, down from a previous estimate of 1.9 percent. Growth projections for the 2025-26 and 2027-28 periods have also been lowered slightly, from 2.4 percent to 2.2 percent and from 2 percent to 1.9 percent, respectively. These figures signal the slowest economic expansion Australia has experienced since the early 1990s recession.

Stephen Smith, a partner at Deloitte Access Economics, described the outlook as unusually pessimistic. He attributed the downgrade to a combination of factors, including sustained high interest rates—the highest in 15 years—and the ripple effects of global oil price shocks. According to Smith, the economic conditions of 2026 have highlighted long-standing vulnerabilities within Australia’s structural framework.

The report points to chronic underinvestment in critical sectors such as energy, housing, infrastructure, and productivity-enhancing industries. This neglect has eroded the economy’s supply-side capacity, limiting its ability to meet demand and maintain robust growth. For years, rapid population growth and strong migration inflows helped support aggregate demand and economic expansion, effectively masking underlying weaknesses in productivity and investment.

Smith emphasized that this strategy can no longer compensate for the structural deficiencies. While strong population growth sustained growth figures, it did less to enhance living standards, exposing the economy’s reliance on external factors rather than fundamental productivity gains. The combination of constrained supply and elevated costs has contributed to the current economic headwinds, raising concerns about the sustainability of Australia's growth trajectory.

The findings reflect a broader consensus among economists who have acknowledged the challenges posed by tightening monetary policy and global economic uncertainties. Australia’s path forward hinges on addressing these structural issues to restore productivity and stimulate investment, thereby strengthening the economy's resilience in the long term.

This article was reported by synthesizing coverage from multiple independent news outlets to present a balanced, unbiased account. Read about our editorial standards. Spotted an error? Let us know.