• Global economic growth is projected to expand at 3.2% this year, slightly higher than previously forecast, reflecting the improving US economy and household spending;
• The Australian economy is expected to pick up gradually through 2024 as inflation declines and the pressures on household incomes ease;
• The Victorian economy is forecast to increase by 2.5% over the year to June 2024, outpacing all states and territories supported by strong population growth, driven by a rebound in international student arrivals.

Economic Summary

Global economic activity has been surprisingly resilient through the global disinflation as growth in employment and incomes held steady, reflecting supportive demand developments of government spending and household consumption. Global economic growth is projected to expand at 3.2% this year and in 2025, slightly higher than previously forecast. In comparison, the forecast for Australian economic growth is softer than three months ago, largely reflecting a weaker outlook for household consumption in the near term. From late 2024, growth is expected to pick up gradually as inflation declines and the pressures on household incomes ease with growth of 1.5% projected this year.

Q1 2024 – Global Economic Overview

Global economic activity has been surprisingly resilient through the global disinflation as growth in employment and incomes held steady, reflecting supportive demand developments of government spending and household consumption. The unexpected economic resilience, despite significant central bank interest rate hikes reflects the ability of households to draw on substantial savings accumulated during the pandemic.

According to the IMF, global economic growth is projected to expand at 3.2% this year and in 2025, slightly higher than previously forecast. The upgrade of economic growth reflects a revision to US growth, while an upward revision to the US broadly offsets a similar downward revision to the Euro area in 2025. In the United States, growth is projected to increase to 2.7% this year, before slowing to 1.9% in 2025.

Global Economic Growth

Although the outlook has been revised up, the growth rate remains low by historical standards, owing to both near-term factors, such as still-high borrowing costs and withdrawal of fiscal support, and longer-term effects from the COVID-19 pandemic and Russia’s invasion of Ukraine.

Global headline inflation is expected to fall from an annual average of 6.8% in 2023 to 5.9% in 2024 and 4.5% in 2025. As the global economy approaches a soft landing, the near-term priority for central banks is to ensure that inflation touches down smoothly, by neither easing policies prematurely nor delaying too long.

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