Australians are preparing for a tight year ahead despite the prospect of two upcoming interest rate reductions. A recent report from Oxford Economics suggests that the nation’s economic challenges persist, with slow employment growth and sluggish business investments casting a shadow. Nevertheless, Australia’s economy is expected to fare better than those of many other developed countries.

The study highlights that while household spending has seen an uptick this year, this boost was largely due to short-lived factors such as the consecutive Easter and Anzac Day holidays and significant retail discounts, which are not expected to extend into 2026.

In some positive news for Australians grappling with the rising cost of living following years of high inflation, Oxford Economics anticipates that the Reserve Bank will implement its fourth interest rate cut of the year next week, with another reduction likely early in 2026.

Murphy Cruise expressed optimism, stating, “We remain confident that inflation will continue to decline as the year progresses.” He further explained, “We forecast that the trimmed mean inflation, the key indicator for the RBA, will close the year at 2.5 percent. This should pave the way for two more rate cuts in the current cycle.”

“We are still confident that inflation will trend lower through the remainder of the year,” Murphy Cruise said. 

“We expect trimmed mean inflation – the measure of most importance to the RBA – to end the year at 2.5 per cent. That should allow for two more rate cuts this cycle.”