Deloitte slashes Australia’s economic growth outlook

9:15am on 7 July 2026

The news: Deloitte has slashed its forecast for Australia’s economic growth from 1.9% to 1.3% for 2026-27, warning the economy is projected to limp along at less than 2% annual growth for the next two financial years.

The context: This places the nation on track for its longest stretch of sub-2% economic growth since the 1990s recession, according to Deloitte’s latest Business Outlook report.

Deloitte Access Economics partner Stephen Smith stated that, while the economy is still growing, Australia’s outlook has deteriorated over the past six months due to higher interest rates and the unresolved oil price shock triggered by conflict in the Middle East.

Smith added that strong population growth has masked weak underlying productivity performance and lifted aggregate growth while doing little to improve living standards. He highlighted that years of insufficient investment in housing, infrastructure, energy and productive capacity have left the supply side of the economy struggling to keep pace with demand.

Deloitte projects the headline consumer price index to remain above 4% for the remainder of the year, with interest rate likely to rise by 25 basis points in August. The firm also forecasts the unemployment rate to average 4.9% in 2026-27, potentially peaking at 5% over the subsequent financial years.

Overall, Deloitte Access Economics expects the Australian economy to grow 2.2% in 2025-26, 1.3% in 2026-27 and 1.9% in 2027-28, marking a decrease from its prior forecasts of 2.4%, 1.9% and 2.0%, respectively.

What they said: “Under Labor, Australia has the lowest average unemployment of any government in half a century, smaller deficits and less debt than the Coalition left us, booming business investment, with tax cuts and higher wages that the right-wing parties oppose,” Treasurer Jim Chalmers said.

“We’ve got a big economic agenda to grow Australia’s economy, boost productivity and address inflation while we also help first homebuyers and roll out vital cost of living relief like tax cuts, higher wages and more paid parental leave from this month,” he added.

The source: Deloitte media release