Unpacking 2025’s Shock Economic Forecasts: Why Australia Outperforms as Global Growth Sputters
OECD forecasts signal a cooling world economy, yet Australia surprises with stronger-than-expected growth in 2025. Learn why.
- Australia’s GDP growth (2025): 1.8% (OECD average: 1.4%)
- US GDP growth predicted (2025): 1.6%, down from 2.8% last year
- Extreme weather hits Australian economy: $2.2 billion lost, Q1 growth at 0.2%
- G20 average projected (2025): 2.9%—a sluggish pace vs recent years
Australia’s economy has shown surprising resilience in the face of global uncertainty and severe weather, outpacing the likes of the US, UK, and even powerhouse economies like China and Germany in the latest 2025 growth forecasts released by the OECD.
While world leaders fret about stalling growth and uncertainty from ongoing trade tensions, Australia’s gross domestic product (GDP) is projected to climb 1.8% in 2025—beating the OECD’s 38-country average of 1.4%. The outlook strengthens into 2026, with a 2.2% uptick expected, signaling steady momentum even as much of the developed world cools.
But what’s really driving Australia’s performance—and can it last?
Q: Why Is Australia Growing Faster Than Other Developed Economies?
Although Australia’s headline numbers show solid growth, the context is complex. The economy weathered severe setbacks, with major floods and Cyclone Alfred wiping $2.2 billion from national output and dampening the first quarter’s GDP to a thin 0.2% gain—far weaker than economists predicted.
Despite these blows, underlying demand is holding strong. While mining, tourism, and shipping took a major hit, Australia’s diversified trade continues to deliver. Notably, robust US demand for Australian beef offers a bright spot amid frayed global trade relationships—a positive sign, even with US tariffs on Australian products increasing uncertainty.
Q: What’s Dragging Global Growth Down?
Around the world, the economic picture has turned gloomy. The US, which expanded a robust 2.8% last year, is set to slow to just 1.6% this year, per the OECD. The UK, South Korea, Canada, and especially Germany and Japan face even more tepid growth—just around 1% or less.
China’s powerful economy, meanwhile, looks set to decelerate from 5% last year to 4.7% in 2025 and 4.3% by 2026 as it navigates domestic challenges and dwindling export demand.
The eurozone offers slight hope, with growth picking up to 1% in 2025, thanks to interest rate relief from the European Central Bank. But overall, G20 economies are forecast by the OECD to stall around 2.9% for the next two years—a marked slowdown from the 3.3% posted in 2024.
What’s behind this deceleration? Unpredictable trade moves from the US, especially sweeping tariffs, have shaken global confidence, disrupted supply chains, and led businesses to pause major investments. Many economists point to this sharp rise in trade barriers and uncertainty as a major drag on both trade and consumer sentiment.
How Can Australia Sustain Growth Amid Global Headwinds?
While federal stimulus—particularly state-run infrastructure projects and energy rebates—propped up growth in recent years, 2025 marks a pivot. As public demand tapers off, policymakers and analysts agree the private sector must step up.
Yet with rising wages, cautious consumers, and fresh momentum expected from higher real household disposable income later in the year, there’s optimism for a modest rebound. Even so, risks remain: household consumption is still soft, and analysts warn that without stronger private sector drive, growth could slip.
How Does Australia Stack Up Against Global Peers?
Here’s how forecasts compare for 2025 and 2026, based on the OECD data:
- Australia: 1.8% in 2025, 2.2% in 2026
- US: 1.6% in 2025 (down from 2.8%)
- UK/South Korea/Canada: Around 1% in 2025
- Germany/Japan: Even slower growth or virtual stagnation
- China: 4.7% in 2025, 4.3% in 2026
- Eurozone: 1% in 2025, 1.2% in 2026
This places Australia above the OECD average both now and projected into next year. While not immune to global shocks, Australia’s diverse trade and strong public foundations offer a relative advantage.
What Should Business Leaders and Households Watch for?
Expect gradual but steady improvements in private sector activity and potentially stronger consumer spending in the second half of 2025. However, stay alert to shifting global trade policies, weather risks, and any changes in infrastructure investment.
Australian Bureau of Statistics data and ongoing updates from major economic organisations will remain key resources for the latest indicators.
Bottom line: While Australia faces real obstacles, especially from natural disasters and fragile global trade, its economy is proving resilient. The months ahead will test its ability to pivot from public to private-led growth and weather whatever global storms appear next.
Stay ahead of the curve—track Australia’s economic rebound and global shifts now:
- ☑ Monitor quarterly GDP updates from ABS
- ☑ Watch for shifts in major trading partner growth (US, China, EU)
- ☑ Assess private sector confidence and consumer spending signals
- ☑ Plan for increased volatility amid unpredictable global trade moves
For more on economic trends and how they impact you, check the latest insights on OECD and Reuters.