Tue Jan 14 03:05:45 UTC 2025: ## Australia’s Economic Boom Turns Bust Amid Cost-of-Living Crisis and Productivity Woes
**Sydney, Australia** – Australia, once lauded for its resilience during the 2007-2009 Global Financial Crisis, is now grappling with its slowest economic growth since the early 1990s (excluding the COVID-19 pandemic). The country’s GDP grew by a mere 0.8 percent year-on-year in the first three quarters of 2024, lagging behind the US (3.1 percent) and the Eurozone (0.9 percent). Without population growth fueled by immigration, Australia would be technically in recession, as per capita growth has been negative for seven consecutive quarters.
This economic slowdown is acutely felt by Australians, particularly young people like 22-year-old Racheal Clayton, who works a full-time job and a part-time gig to cover living expenses in one of the world’s most expensive housing markets. The soaring cost of living, driven by inflation peaking at 7.8 percent in December 2022, coupled with stagnant wages (4.8 percent below pre-pandemic levels), leaves many struggling to make ends meet. Homeownership seems increasingly unattainable for many young Australians.
Experts point to several factors contributing to the crisis. The Reserve Bank of Australia’s (RBA) interest rate hikes, aimed at curbing inflation, have significantly dampened consumer spending, a major driver of GDP. A chronic housing shortage, estimated at 106,300 dwellings by 2027, further exacerbates the problem, pushing up property prices and rents. Furthermore, a lack of productivity growth and insufficient investment in long-term growth drivers are cited as underlying weaknesses.
The government’s response has included reducing immigration, aiming to ease cost-of-living pressures. While migration has boosted population growth, economists argue it’s not the root cause of the economic woes, emphasizing the need for productivity-enhancing reforms. The government’s mid-year economic outlook predicts continued slow growth and a budget deficit.
With a federal election on the horizon, the economic situation is set to be a key battleground for political parties. The challenge for Australia lies in addressing underlying structural issues, stimulating productivity, and fostering long-term economic growth to alleviate the current cost-of-living crisis and regain its former economic standing.
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