Goldman Sachs Group has revised its forecast for Australia’s economic growth in 2025, lowering its projection from 2% to 1.8%, citing potential “negative spillovers” from the expected rise in tariffs under the incoming Trump administration. The economic research team at Goldman Sachs highlighted the possibility of heightened tariffs on Chinese exports, a key factor affecting Australia’s largest trading partner. President-elect Donald Trump has previously threatened to implement 60% tariffs on Chinese goods, aiming to protect U.S. industries and jobs, which is anticipated to disrupt global trade dynamics, including Australia’s export sector.
Australia’s Economic Growth in 2025: Revised Projection?
The revision comes as Australia’s economy has slowed, grappling with the impact of high interest rates. Currently at a 13-year high of 4.35%, these rates have strained consumer spending and dampened economic momentum. Goldman Sachs has taken a more dovish stance, predicting that the Reserve Bank of Australia (RBA) will begin cutting rates earlier than expected, with a reduction anticipated in February 2025. Goldman’s economists, led by Andrew Boak, forecast that the central bank will reach a terminal rate of 3.25% by November next year, contrasting with market expectations, which don’t foresee rate cuts until May.
In addition to the global trade headwinds, Goldman notes the potential for fiscal stimulus in Australia ahead of the May 2025 federal election. The center-left Labor government is going to implement new measures aimed at alleviating voter concerns about rising living costs, such as energy rebates, rental assistance, and reductions in student debt.
Goldman’s outlook for New Zealand is similarly cautious, forecasting continued rate cuts by the central bank in 2025, with the terminal rate expected to hit 3% by mid-year. The interplay of domestic policies and global trade conditions will shape the economic strategies of both countries.
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