• The global economy has shown resilience to the trade policy shocks, with growth is projected to slow this year and moderate further next year reflecting headwinds from uncertainty and the tariff shocks;
• After years of subdued growth, Australia’s economy is gathering momentum, recently recording its highest annual growth rate in two years;
• Boosted by dwelling investment recording the strongest increase in three years, the Victorian economy is forecast to increase to 2.5% over the next 12 months.

Economic Summary

The global economy remains in flux, but has shown resilience to the trade policy shocks, in some part because these shocks materialised on a smaller scale than expected, but the drag from shifting policies is becoming more visible. Globally, more recently it appears that consumer consumption growth and business investment has weakened in line with depressed consumer and business confidence. Despite US tariff policy creating global trade uncertainty, Australian business confidence has not experienced a significant impact. After years of subdued growth, Australia’s economy is gathering momentum, with Australia’s economy most recently recording its highest annual growth rate in two years.

Q3 2025   – Global Economic Overview

The global economy remains in flux, after the United States introduced higher tariffs starting in February. While subsequent deals and resets have tempered some extremes, uncertainty about the stability and trajectory of the global economy remains heightened.

The global economy has shown resilience to the trade policy shocks, in some part because these shocks materialised on a smaller scale than expected at their onset, but the drag from shifting policies is becoming more visible. Globally, more recently it appears that consumer consumption growth and business investment has weakened in line with depressed consumer and business confidence, following the surge in activity prior to the implementation of increased tariffs.

Global inflation is expected to continue declining, though its pace will vary across countries. Some economies may see a temporary increase in inflation due to trade tariffs before it moderates.

Global growth is projected to slow from 3.3% in 2024 to 3.2% in 2025 and to 3.1% in 2026. Although the projections are an improvement relative to mid-year expectations, the forecasts are lower than those made prior to the policy trade shifts reflecting headwinds from uncertainty and the tariff shocks.

Global Economic Growth

United States economic growth is forecast at 2.0% this year and remain steady at 2.1% in 2026 and 2.1% again in 2027, which is lower than previously projected with its outlook having been adversely impacted by greater policy uncertainty, higher trade barriers, and lower growth in both the labor force and employment.

Growth in the Euro area is expected to pick up modestly with elevated uncertainty for higher tariffs continuing to hinder momentum in the region. Economic growth of 1.2% is expected for the Euro area in 2025 which has been boosted by a strong performance in Ireland and 1.1% next year underpinned by recovering consumer consumption in Germany.

In the United Kingdom, growth in 2025 and 2026 is expected to be 1.3%, revised slightly upwards on previous projections , reflecting the strong activity in the first half this year and an improvement in the external environment, including the UK-US trade deal announced in May.

Given the volatility of trade tensions between China and the United States, economic growth projections for China have similarly been unpredictable as highlighted by the latest Chinese announcement over rare earth restrictions. China’s economy is now forecast to expand by 4.8% this year before moderating further in 2026 with growth of 4.2% predicted. Despite some support from government policies, consumer sentiment is downbeat with retail sales growth softening.

In India, growth is projected to be 6.6% in 2025 and 6.2% in 2026, reflecting an upward revision for 2025 and a slightly downward revision for 2026 impacted by the US effective tariff rate on imports from India.

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