Australia’s economic outlook remains mixed as strong growth coincides with rising interest rate expectations and ongoing housing supply challenges. Economists from NAB now predict further interest rate increases in March and May following the Reserve Bank’s February rate rise to 3.85%, citing strong economic growth, a tight labour market and persistent inflation.

Recent national accounts data showed the Australian economy grew by 2.6% in 2025, with a 0.8% increase in the December quarter supported by higher government spending and stronger private demand. While the figures highlight economic resilience, some economists warn that stronger growth may increase the likelihood of further monetary tightening.

Meanwhile, Australia’s housing shortage continues to limit opportunities for buyers. A Westpac report suggests the supply imbalance could take at least five years to resolve, with many potential buyers struggling to find suitable properties due to limited listings and slow construction activity.

At the same time, business leaders have also raised concerns about the broader economic impact of artificial intelligence, warning that excessive reliance on overseas technology companies could shift economic value offshore if Australia fails to capture the productivity benefits domestically.