Economists will be happy that their forecasts for 2025 were close to the mark, but uncertainty will remain a key driver in 2026. In his latest inFocus piece, Michael Blythe looks at how the Australian economy is likely to track against this uncertainty in 2026.

‘Business as usual’ (BAU) may seem like a reasonable outcome for the Australian economy but is this good enough? BAU is below what was ‘normal’ in the pre-COVID period – both in terms of productivity and GDP growth. So where are the opportunities amid a mix of geopolitical and societal factors?

Key discussion points:

●          A gap persists between (gloomy) forecasting rhetoric and (more-of-the-same) forecast figures.

●          The gap between rhetoric and the numbers for 2026 reflects the wide-ranging uncertainties.

●          Beyond the standard economics, uncertainty rises from a mix of geopolitical and societal factors.

●          The global monetary easing cycle is likely to reach its end in 2026.  Fiscal policy is constrained.

●          The Australian economy seems set for a business-as-usual outcome.  But BAU is not good enough.

●          The RBA will probably cut rates in H1 2026.  But they are signalling that the next move could be “up”.

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