A snapshot of the Australian economy ahead of the 2024-2025 financial year

Financial planning for the year ahead.

At Poole Advisory, we always recommend you regularly review your financial plan with a qualified advisor to keep up with what’s happening in the economy. As we enter the new financial year, let’s look at the current state of the Australian economy and how this will impact your financial decisions moving forward.

The current state of Australia’s big four economic indicators

These four metrics give us a good snapshot of the economy’s health:

  • gross domestic product (GDP)
  • unemployment rate
  •  inflation
  •  interest rates.

After periods of high inflation, soaring interest rates, and a cost-of-living crisis, the numbers indicate light at the end of the tunnel in the next financial quarter.

Australian GDP has now risen for nine consecutive quarters

GDP measures the total value of all goods and services produced in Australia. It gives us an indication of whether the country’s economy is shrinking or growing.

In the December 2023 quarter, Australian GDP rose by 0.2 per cent. While this is only a small percentage increase, it’s the ninth consecutive quarter we’ve recorded positive GDP growth, which indicates our economy is healthy heading into the new financial year.

Our national unemployment rate remains low at 3.9%

According to the Australian Bureau of Statistics (ABS), in March 2024 the national unemployment rate remained steady at 3.9%.The New South Wales (NSW) unemployment rate was below the national rate at 3.7%. A low unemployment rate is good news because it means more people have jobs, which can lead to higher incomes, increased consumer spending, and a stronger overall economy.

The Consumer Price Index (CPI) rose 3.6% over twelve months to the March 2024 quarter

In Australia, we use the CPI to measure inflation. It is calculated by measuring a ‘basket’ of commonly purchased goods and services and determining how much they’ve gone up (or down) in price compared with the same period the year before.

Over the twelve months to the March 2024 quarter, the CPI rose 3.6%. The Reserve Bank of Australia (RBA), whose role is to control inflation, admit it is dropping more gradually than anticipated. However, they expect the CPI will reach the target range of 2-3% in the second half of 2025.

The official interest rate remains steady at 4.35%

The official interest rate (also known as the cash rate) is the rate of interest banks pay to the RBA to borrow or lend money. It impacts how banks decide mortgage rates, interest rates for savings accounts and term deposits, and has a large impact on consumer confidence.

In May 2024 the RBA held the interest rate steady at 4.35%. While mortgage owners avoided another painful rate rise that would’ve increased repayments on variable loans, the RBA is unlikely to lower interest rates until the CPI gets closer to their target rate of 2-3%.

Smart financial planning for Bowral and Southern Highlands residents

How does this economic outlook impact your financial plan?

These economic conditions can impact your savings capacity and the return on your investments, but they also impact the way the wider investment community behaves. That’s why it’s crucial to tailor your financial plan to the current economy. Here are a few points you should consider discussing with your financial advisor ahead of the next quarter:

Pay down high-interest debt

Given interest rates have risen significantly over the past few years, it’s become more expensive to service debt. Reducing high-interest rate debt, such as credit cards, can protect you against the compounding effect of high inflation on interest costs.

Shop around for a better mortgage 

While the RBA is unlikely to raise interest rates in the coming months, as the CPI trends towards their target rate, you may still be feeling the pinch. If you haven’t already done it, consider speaking to your bank or a mortgage broker to find a more favourable home loan. If you own an investment property, consider raising the price of rent to help cover your mortgage and upkeep costs.

Don’t hold too much cash in your savings account

Depending on your circumstances, a good rule of thumb is to save 3-6 months of living expenses in your savings account as an emergency fund. Once you reach that amount, consider using surplus cash to invest in assets with greater potential for higher returns. 

While interest rates have risen significantly over the past few years – which means greater returns on your savings account – other assets, such as real estate and stocks, have risen faster. Rather than stockpiling extra money in your savings account, consider moving money into higher-yield investments.

Diversify your investment portfolio

GDP continues to show small but steady growth, unemployment remains low (particularly in NSW), and interest rate rises have subsided, with potential cuts on the horizon in the next year. These factors suggest that the bleak economic outlook from the past 12-24 months is clearing, giving us a solid foundation for potential investment growth.

  • Consider moving away from low-interest-rate assets to include more shares in your portfolio (depending on your risk tolerance).
  •  If you rely on your investments to provide income, dividend stocks, real-estate investment trusts (REITs), ETFs, LICs, or managed funds can all be great options.
  • While the CPI has dropped significantly since the 8.4% rise in December 2022, given the RBA kept the cash rate stable, there is always a chance inflation may increase. If this happens, consider adding inflation hedges to your portfolio.

Overall, remember that a well-diversified investment portfolio can ensure you avoid unnecessary risks and are well-placed to achieve your financial goals over the next quarter.

Smart financial planning for Bowral and Southern Highlands residents

These economic indicators highlight why it is so critical to regularly review your financial plan with a qualified advisor. A consultation with Poole Advisory will allow you to optimise your financial plan to achieve your long-term financial goals while taking into account the current state of the economy.

The team at Poole Advisory have over 20 years of experience and offer services including retirement planning, wealth creation advice, superannuation and SMSF, estate planning, cash flow management and wealth protection. If you’re in Sydney, Bowral, or the Southern highlands, send us a message and we’ll help you put a plan in place for the new financial year.


Compliance Disclaimer:

This information contains general advice only, that is, advice which does not take into account your needs, objectives, or financial situation. You need to consider the appropriateness of that general advice in light of your personal circumstances before acting on the advice. You should obtain and consider the Product Disclosure Statement for any product discussed before making a decision to acquire that product. You should obtain financial or credit advice that addresses your specific needs and situation before making investment or borrowing decisions. Taxation information is based on our interpretation of the relevant laws as at 1 July 2018. While every care has been taken in the preparation of this information, Prosperitas Partners Pty Ltd does not guarantee the accuracy or completeness of the information. The case studies are hypothetical, for illustration purposes only and are not based on actual returns


Poole Advisory Pty Ltd ABN 15 642 040 604 is a Corporate Authorised Representative (No. 001282603) of Prosperitas Partners Pty Ltd ABN 30 662 654 453 AFSL 544 917

Get in touch

Learn more

Related Articles

Learn more

Related Articles