• Even though tariff rates have come down since the escalation witnessed in April, growth projections have been downgraded with the global economy forecast to now grow by 2.9% this year;
• Similarly, the outlook for the Australian economy is a little weaker amid heightened uncertainty with Australia’s economy projected to grow by 2.1% in 2025, before growth of 2.2% forecast in both 2026 and 2027;
• The Victorian economy is forecast to increase to 2.50% over the next 12 months, up from growth of 2.0% over the 12 months to June 2025.

Economic Summary

Even though tariff rates have come down since the escalation witnessed in April, most notably between China and the United States, uncertainty remains elevated. This sharp rise in uncertainty has negatively impacted business and consumer confidence and has held back trade and investment. In this challenging and uncertain environment, economic growth projections have been downgraded in recent months. Global economic growth forecasts have been revised to a modest 2.9% in 2025 and in 2026. Although there have not been signs of a material deterioration in leading indicators, the pick-up in the Australian economy is expected to occur more gradually than previously forecast due to softer global demand and weaker consumption momentum.

Q2 2025 – Global Economic Overview

Even though tariff rates have come down since the escalation witnessed in April, most notably between China and the United States, uncertainty remains elevated. This sharp rise in uncertainty has negatively impacted business and consumer confidence and has held back trade and investment.

In this challenging and uncertain environment, economic growth projections have been downgraded in recent months. Global economic growth forecasts have been revised to a modest 2.9% in 2025 and in 2026. Weakened economic prospects will be felt around the world, with almost no exception. Lower growth and less trade will hit incomes and slow job growth. Growth in advanced economies is projected to be 1.5% in 2025 and 1.6% in 2026.

Although inflation has recently declined in most countries, service price inflation remains stubbornly elevated, and goods price inflation has increased slightly in many countries due to rising food prices. Protectionism is adding to these inflationary pressures, and inflation expectations have risen substantially in several countries.

Global Economic Growth

In the United States, with tariff rates settling at lower levels than those announced in April and looser financial conditions, the economy is projected to expand at a rate of 1.9% in 2025. Growth is projected to pick up slightly to 2.0% in 2026, with a near-term boost from tax incentives for corporate investment.

In the Euro area, growth is expected to accelerate to 1.0% in 2025 – this is an upward revision on previous projections, largely driven by Ireland boosted by Irish pharmaceutical exports to the United States. Growth in the Euro area is expected to expand by 1.2% in 2026 with increased defense spending commitments expected to have an impact.

Persistent uncertainty in the global economy and international trade policy, alongside tightening fiscal policy, a weakening labour market and the lagged effect of higher interest rates, has weighed on economic momentum in the United Kingdom. The United Kingdom’s economy is expected to grow by 1.2% in 2025, before rising to 1.4% in 2026.

In China, after robust growth at the start of 2025, the tightening of bilateral tariff rates on imports to the United States, combined with retaliatory trade measures, has weakened economic growth. However, this is expected to be partly offset by domestic fiscal stimulus focused on government subsidies for consumer goods. China’s economic is projected to ease from 5.0% in 2024 to 4.7% in 2025 and 4.3% in 2026, with increased trade costs and recent increases in global food prices pushing inflation up from its currently low levels.

India is projected to continue to experience strong and broadly stable economic growth. While easing monetary policy will aid ongoing expansion with economic growth projected to be 6.3% over the next 12 months and 6.4% in the following year.

Copyright © 2025 by Urban Property Australia All rights reserved. No part of this publication may be reproduced in any form, by microfilm, xerography, electronically or otherwise, or incorporated into any information retrieval system, without the written permission of the copyright owner.