International

Global economic growth has slowed in 2023, with a slowing in growth across major advanced economies weighed down by a synchronised rapid tightening of monetary policy globally. 

The IMF is forecasting global economic growth to slow from 3.5 per cent in 2022 to 3.0 per cent in 2023 and
2.9 per cent in 2024, although the risk of a significant global economic downturn is now considered less likely than previously anticipated. 

While world economic output in coming years is now forecast to be slightly stronger than expected at Budget, it is still weaker than the 3.8 per cent per annum average over the 2 decades prior to COVID-19.  

Since Budget, long term government bond yields have risen further, including in the United States where economic activity has been particularly resilient. 

Globally, inflation has moderated from multi-decade highs but remains above-target and a key challenge in most advanced economies, particularly for services. The IMF forecasts global headline inflation to fall from its peak of
8.7 per cent in 2022 to 6.9 per cent in 2023 and 5.8 per cent in 2024. 

While interest rates increasingly appear to be near their peak in most advanced economies, labour markets generally remain resilient, supporting demand, while core measures of inflation are proving sticky. 

Further, rising energy prices have temporarily halted the inflation slowdown in recent months in many economies, including in Australia, with global oil prices in October being 21 per cent higher than they were in May, as supply cuts by major producers were extended.

Chart 2: Consumer price inflation in major economies¹

In China, which regained its place as Queensland’s top export market in the year to October 2023, economic growth has moderated since re-opening from COVID-19 lockdowns. A range of economic data since the Budget point to a weakening in China’s economy, including in the property sector, and authorities have responded with policy stimulus aimed at the property and household sectors, as well as lower interest rates. China’s economy, which is now forecast to grow by 5.0 per cent in 2023 and 4.2 per cent in 2024, remains a key risk to the outlook.

On balance, given these factors, risks to the global outlook remain skewed to the downside. The conflict in the Middle East has so far had only modest impacts on financial and commodity markets, but a broadening in the conflict could impact oil supply and have broader spillover effects. 

While overall global economic activity has evolved broadly as expected, the outlook for industrial production across Queensland’s major trading partners has deteriorated. Trade tensions and restrictions have continued, including between the US and China. For 2023, industrial production is forecast to contract in Japan, Korea, Singapore, Taiwan, and the Eurozone, while growth in China has also been downgraded.

Weaker growth or declines in industrial production in key trading partners suggests softer demand for Queensland’s commodities, including metallurgical coal. Commodity prices are generally lower than at Budget, although ongoing supply constraints have made metallurgical coal and oil prices notable exceptions.  

Despite the weaker global outlook tempering demand, an unwinding in supply constraints across the Queensland resources sector is expected to boost coal, LNG, and metals export volumes in the near term, while drier conditions are expected to increase short-term beef export volumes as processing rates increase.  

Table 2: Industrial Production growth Forecasts

National economy

The Australian economy has remained robust amid a slowing global economy and geopolitical uncertainty, with GDP growing by 3.0 per cent in 2022–23.

Solid economic growth during the post-pandemic recovery has sustained a tight labour market in Australia, with the national unemployment rate remaining under 4 per cent since March 2022.

Inflation in Australia is moderating, but it has fallen at a slower rate than expected due to growth in automotive fuel prices and persistent services inflation. The RBA expects inflation to return to the top end of its 2 to 3 per cent target range by the end of 2025. 

The RBA has tightened monetary policy substantially since May 2022. From the “emergency low” of 0.1 per cent during the COVID-19 pandemic, the cash rate had been raised 425-basis points to 4.35 per cent — the highest rate since November 2011. Market pricing currently suggests the cash rate is at its peak and may begin declining by late 2024.

National house prices in November 2023 rebounded 8.3 per cent since the recent low in January 2023. While the increase in house prices has been broad-based across capital cities and regions, the rate of growth nationally appears to have moderated in recent months, driven by slowdowns in Sydney and Melbourne.

National household consumption and dwelling investment has been weak with high inflation and increased mortgage repayments weighing on household disposable incomes. 

The RBA revised up its near-term economic growth outlook in its latest November 2023 Statement on Monetary Policy due to stronger-than-expected momentum in the economy over the first half of 2023. The RBA forecasts national year average GDP growth of 1¾ per cent in 2023–24 before picking up to 2 per cent in 2024–25.

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