Sluggish growth conditions are set to stick around well into 2025, ahead of a possible uptick in the unemployment rate, an economic survey forecasts.
The latest leading index by Westpac and the Melbourne Institute reports while the growth rate has increased slightly, it remained in negative territory.
The index, which forecasts the growth rate three to nine months in the future, showed it lifting from -0.26 per cent in August to -0.15 per cent in September.
Westpac’s head of macroforecasting Matt Hassan said the negative trend is expected to continue into the new year.
“Growth will improve over the coming year, but remain relatively subdued,” he said.
“The leading index growth rate has been slightly negative for the best part of a year now. That in itself is fairly rare.”
Mr Hassan said while the growth rate may improve in the next month if there is an uptick in the price of commodities and global financial markets are triggered by stimulus measures in China.
The forecast came ahead of labour force figures for September being released by the Australian Bureau of Statistics on Thursday.
Economists have tipped for the unemployment rate to increase from 4.2 per cent to 4.3 per cent, with 15,000 jobs being added to the economy. Experts have forecast the participation rate to remain steady at its all-time high of 67.1 per cent.
Employment Minister Murray Watt said he remained hopeful of job creation figures continuing.
“Nearly one million new jobs have been created since our government was elected, which is the most that any government has ever delivered in Australian parliamentary history in a single term,” he said.
“We understand that the economy is slowing, the labour market is softening.”
Senator Watt said he would not be surprised to see a small rise in unemployment numbers based on forecasts, but job creation would still be strong.
It comes as more businesses are struggling to pay outstanding invoices to suppliers though the proportion falling behind is still below pre-pandemic levels.
Wednesday’s risk update from CreditorWatch suggested lacklustre consumer spending and elevated costs of doing business have firms paying late at the highest rate since March 2021.
The rate of payments more than 60 days in arrears was up more than 20 per cent year-on-year.
Yet the proportion of firms falling into arrears remains lower than experienced pre-COVID-19 – a time when businesses felt the squeeze as banks tightened lending standards following a royal commission.
“This suggests a softer economy at the present time, but not an especially weak economy, overall, albeit with some significant variations in conditions by sector,” the debt monitoring firm says in its September business risk indicator.
Information, media and telecommunications businesses experienced the highest rates of late payment, followed by the electricity, gas, water and waste services industry.
Consumer-facing sectors, such as hospitality, have also been under pressure, with the federal government’s caps on foreign students thought to bruise education and training providers in coming months.
“The rural sector also has been doing well after three favourable seasons in a row, but lower commodity prices, especially for beef, could be expected to see increased pressures in coming months,” CreditorWatch says in its report.
The firm’s chief economist, Ivan Colhoun, highlighted a number of promising signals for businesses, including “tentative signs” tax cuts were helping to support consumer spending.
Lower interest rates would further support economic activity yet the economist was not expecting cuts until early 2025 based on the Reserve Bank of Australia’s posturing.
