Hard-up Australians to wait until 2030 for disposable income to recover: Deloitte Access Economics

It will be another five years until Australians feel financially stronger, according to dire new forecasts that suggest the economy improving but still not “good”.

The hangover from the pandemic is expected to drag on until 2030, according to Deloitte Access Economics, which is when purchasing power — or disposable income — is finally expected to return to pre-COVID levels.

The strong jobs market, lower inflation, stage three tax cuts, some real wage increases and expected interest rate cuts this year mean the economy overall is set to be better than expected — with economic growth pegged at 1.6 per cent, up from a dismal one per cent in 2024.

That’s expected to lift to 2.3 and 2.7 per cent in 2026 and 2027, respectively.

But Deloitte Access Economics partner Cathryn Lee cautioned Australians from getting complacent, saying the reality is the nation’s economy is still challenged.

“’Better-than-expected’ is not the same as ‘good’, as has been revealed by escalating business insolvencies, considerable mortgage stress and a deep per capita recession,” she said.

“Real wages are now grinding higher, but it is likely to be 2030 before Australian workers recover their pre-pandemic purchasing power.

“Dwelling construction activity is unlikely to get any worse, but Australia’s housing crisis is likely to persist.”

It comes as Australians remain stuck in the longest household recession on record, with GDP per capita going backwards for the past seven quarters.

Deloitte said this, as well as Wednesday’s crucial quarterly inflation figures, should open the door for a rate cut.

“There is increasing confidence that underlying inflation is moving sustainably towards the target range of 2-3 per cent,” it said.

Economists predict the trimmed mean inflation — which strips out volatile prices including energy subsidies — to have eased to a three-year low of 3.3 per cent.

“Yet the surprisingly resilient labour market is complicating the Reserve Bank’s decision, even in the face of a stagnant economy and moderating inflation,” Deloitte said in its report.

“While the conditions for a rate cut are now real, a cautious Reserve Bank may well hold off for a couple more months.”

Deloitte expects the RBA to cut the cash rate by a total of 0.75 percentage points in 2025, followed by another 75bp next year.

By the end of the rate cutting cycle, a household with an average-sized mortgage with a variable mortgage rate would be around $8000 better off in today’s dollars.

Deloitte forecasts the ACT and Queensland to lead the nation this financial year, with gross state product growth of 3 per cent and 2.5 per cent, respectively.

They are followed by South Australia (1.6 per cent), Victoria (1.3 per cent), NSW (0.8 per cent) and WA (0.3 per cent). The Northern Territory and Tasmania are the laggards, with growth going backwards 0.4 per cent and 1.1 per cent, respectively.

For WA, weakness in primary commodity exports is expected to drag on the State’s economy in 2025.