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2025 Economic Update: What It Means for Your Business

Updated: Oct 1

At our recent Sullivan Dewing Economic Update, we were joined by Tapas Strickland, Head of Market Economics at NAB, who shared valuable insights on the state of the economy and what’s ahead for businesses in FY26.


The Economy at a Glance

  • Australia has managed a “soft landing” with unemployment steady at 4.3%.

  • The RBA cash rate is expected to fall to around 3.1% in 2025, but not much lower due to ongoing cost pressures.

  • The Australian dollar is tipped to rise to 70 US cents by the end of 2025 and 73 cents by 2026.


State and Demographic Shifts

  • Victoria is lagging in growth (1.6%), while Sydney (3.8%) and Queensland are stronger, boosted by Olympic-related projects.

  • Spending pressures are hitting under 25s and 45–54 year-olds, while older Australians remain more resilient.


Housing and Households

  • Households remain in good shape:

  • Over $300 billion sitting in mortgage offset accounts.

  • Net worth up 61% since the pandemic.

  • But housing supply is falling behind strong population growth.

  • Productivity in construction is down, creating opportunities for innovation.


Emerging Trends

  • Artificial Intelligence (AI): Adoption is still early at the business level, but employees may already be using it in their work. Huge potential for productivity gains.

  • Retail: Online shopping is growing again — non-food online sales are at 18% and climbing, compared to 30% in the UK.

  • Health shifts: GLP-1 drugs (like Ozempic) are changing consumer behaviour, reducing spending on groceries and alcohol.

  • Work from home: Now stabilised at around 75–80% of pre-COVID levels.

  • Aging population: Each year, 200k–250k Australians move into the 80+ age bracket — creating new needs and opportunities for businesses.


Global & Geopolitical Landscape

  • The US is pressuring allies (including Australia) to lift defence spending from 2% to potentially 3.5% of GDP — equal to an extra $40 billion a year.

  • The US is not fully decoupling from China but tightening in key industries — which is less disruptive for Australia.

  • ASEAN and India offer major long-term opportunities thanks to rapid urbanisation and population growth.


What Businesses Should Do

  • Watch interest rates — plan for lower borrowing costs, but don’t expect rates to fall dramatically.

  • Review your customer base — target products and services for an aging population, while recognising younger groups are under financial pressure.

  • Explore AI — talk to your staff about how they’re already using AI and consider formal adoption to boost efficiency.

  • Adapt to online retail — consider how the shift impacts your business model.

  • Look for opportunities in defence spending — especially if your business can align with government contracts.

  • Think global — position for growth in ASEAN and India markets.


Final Word

The big message? 

Despite challenges, Australia remains in a strong position. Households are resilient, businesses have opportunities in technology and global markets, and demographic shifts are opening new doors.


Now is the time to review your strategy, embrace change and position your business for growth in 2025 and beyond.


Watch the Video Replay



Please find below links to a PDF copy of Tapas's PowerPoint.



If you have any questions or require any more information please do not hesitate to contact your Client Manager or one of the Sullivan Dewing team.

 
 
 

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