Australia’s economy is experiencing a modest upswing, according to HSBC Australia chief economist Paul Bloxham. This rebound, however, has contributed to higher inflation amid weak productivity growth and supply constraints, prompting the Reserve Bank of Australia (RBA) to resume increasing interest rates, with further hikes anticipated. Bloxham noted significant divergence in economic conditions across states, with Queensland and Western Australia outperforming Victoria.
Western Australia has recorded the strongest growth since the pandemic, fuelled by a tight labour market, record migration, and rising housing prices in Perth. Bloxham highlighted the global focus on critical minerals as a significant opportunity for the state, particularly as global steel demand plateaus. He also mentioned that favourable GST distribution arrangements have benefited the state, though these are subject to a Productivity Commission inquiry in 2026.
Queensland’s economy has also demonstrated strength, supported by substantial interstate migration. The upcoming Brisbane 2032 Olympics is expected to trigger the largest infrastructure investment in the state’s history. However, this presents near-term risks due to the construction sector operating near capacity and the state’s worsening fiscal position.
Bloxham also pointed out the fiscal challenges emerging in Victoria, where public debt has risen sharply, making it one of the most indebted state governments globally outside the US. In response, policymakers have curtailed infrastructure projects. On a positive note, household consumption has been recovering, providing some economic support.
