2025 has certainly started with some major changes. Global conflicts remain far from settled, there have been notable changes of leadership in the US, Europe and Canada, a confident China is asserting its interests, while here at home we continue to face an ongoing skills shortage, pressure from interest rates and inflation, and are facing our own Federal elections in a matter of months. All this makes it a bit difficult to know what to expect, but we’ve gathered some of the leading forecasts in this summary.

When it comes to the Australian economy, the one take-away from perusing the forecasts is experts collectively seem to have no better idea of what will happen than you or I – but let’s take a look at where they agree…and where they don’t.

Good news is that latest Australian Industry Index® from Australian Industry Group (AiG) recorded significant improvement in November, giving us a bit of a boost as we head into the New Year.

Their Australian PMI®, which charts results for all manufacturing industries, also improved slightly, with manufacturers noting a lift in overseas competition and a reduction of new orders for some markets. The softening of the AUD has also increased prices for some import-reliant businesses.

While activity in Australia’s industrial sectors, employment and new orders indicators all strengthened, AiG experts cautioned that improvements are more a matter of contraction easing than an actual expansion, however the broader trends suggest a modest improvement in overall industrial business conditions in the first half of this financial year.

Other experts, too, broadly agree that economic growth in Australia is likely to be better than last year – which is encouraging given that 2024 saw our economy experience its slowest year since the early 1990s. The IMF and KPMG both predict the Australian economy will grow this year – the IMF says by around 1.2%, KPMG just over 2% – but both warn that while growth may be resilient, several significant risks remain.

At the top of the list is the rising geopolitical tensions headed by the wars in the Ukraine and Gaza, and potential changes to trade and fiscal policies thanks to the political changes across Europe, the US and Canada.

International experts are mainly hopeful that 2025 will see, if not a ceasefire, at least a operational conclusion to the Israeli occupation of Gaza now that Hamas has been all but eradicated. Political pressure is mounting in Israel for Benjamin Netenyahu to bring an end the campaign, and incoming US President, Donald Trump, has made no secret of his aim to end both the Gaza conflict and the war in the Ukraine early in his second tenure. Time will tell.

Closer to home, China continues to step up its rhetoric and threats over Taiwan and the South China Sea and, while there’s no reason to anticipate action on these fronts in the very near future, it’s one to watch, with trade traffic a likely casualty of any conflict.

The uncertainty created by all these conditions not only impacts on consumer confidence but, as many in our industry know all too well, have a range of knock-on effects for business including ongoing supply chain disruptions – much improved from the height of the pandemic but still an issue.

On the local front, news for business is better. Core, or underlying, inflation has eased and is now close to the RBA’s ‘2-3%’ target range. This, together with the recent Consumer Price Index numbers – a 2.3% rise in the 12 months to November – is likely to give the RBA more confidence to proceed with interest rate cuts by Q2 this year.

Money markets are pricing in a two-in-three chance of a rate cut of 25 basis points at the RBA’s first Board Meeting in February (provided there are no tariff surprises from the Trump administration) and many experts, including CBA, agree. It’s worth noting, however, that many others – including the other big banks – still believe May is a more likely date.

While the skills shortage looks set to continue, the RBA expects tight labour market conditions to return to balance by late 2025, saying in its November Statement on Monetary Policy that it expects a slight rise in unemployment over the coming year, with slowing growth in wages over the same period.

Finally, the election. While many polls put Anthony Albanese’s Labour government and the Liberal opposition under Peter Dutton neck and neck for the Federal Election, the latest figures suggest a narrow win by the Liberal / National Party. With an effective three-seat buffer in Parliament, however, the question is whether the current narrow lead will be hold to get the Libs over the line, or whether Labour will be able to form a minority government.

Albanese still has a narrow lead in the Approval ratings and is a tiny squeak ahead in some of the November and December preferred Prime Minister polls, but with no election date set, and weeks if not months of campaigning still to go, the result is anyone’s guess.

Aside from all these predictions, it’s clear that 2025 will bring with it a range of other changes, challenges and opportunities, driven by increased technological change – supercharged by AI – changing workplace regulations, and more. Whatever happens, the team at ASGA will continue to support our Members and the industry, with the events, webinars, information and resources you need, not just to survive, but thrive.