Australia's economy faces mounting pressure as consumer confidence languishes near a 50-year low and GDP per person is expected to contract for two consecutive quarters. The Reserve Bank of Australia has raised interest rates three times in 2026 to 4.35%, while house prices are falling in Sydney and Melbourne.
Annual headline inflation slowed to 4.0% in May, down from a forecast peak of 5%, though underlying inflation rose to 3.6%. Markets are pricing in 15 basis points of further tightening by year-end, with two rate cuts expected in 2027.
RBA Assistant Governor Sarah Hunter warned on July 8 that supply shocks will continue to buffet the global economy. Oil prices retreated to about $72 per barrel after spiking to $120, with Commonwealth Bank analysts forecasting a drop to $60 by year-end. The RBA's next policy meeting is scheduled for mid-August.