Who’s Feeling Good About the Australian Economy — and Who Isn’t
- Written by Times Media
Australia’s economic mood seems to have cracked open a rare moment of optimism. But beneath the surface, the cheer is selective — depending on who you are: consumers, businesses, or policymakers. Here’s a breakdown of who’s feeling buoyant, who’s cautious, and where the fault lines are shaping up.
✅ Who’s Feeling Positive
Consumers – Tentatively Optimistic
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A survey released in November 2025 showed that consumer sentiment climbed sharply — the headline index jumped 12.8% to 103.8, marking the first time in nearly four years that optimists outnumbered pessimists.
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In that same survey, households reported a more favourable outlook for their finances over the next year, and improved expectations for the overall economy over both a one-year and five-year horizon.
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For many households, this sense of relief is underpinned by a modest rebound in incomes and a belief that recent interest-rate moves might offer breathing room.
Why it matters: When consumers feel confident — about their jobs, incomes and cost of living — they’re more likely to spend. For a consumption-driven economy such as Australia’s, that can help sustain growth even when export or investment conditions are shaky.
Some Businesses — Especially in Services & Construction
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According to a mid-2025 survey by National Australia Bank (NAB), business confidence rose to +7 in July — the highest reading since August 2022. That followed strength in services and construction.
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A more recent review by Roy Morgan found Australian business confidence at 101.7 in October 2025 (just above the neutral 100).
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In that survey, 58.2% of businesses said they expected “good times” for the Australian economy over the next 12 months — up 2.9 percentage points. And nearly a third expected strong economic conditions over the next five years.
Why it matters: Businesses feeling broadly positive — especially in consumer-facing service sectors and construction — can translate into hiring, wage growth, and renewed investment. That, in turn, helps support consumer spending, property activity, and general economic momentum.
Policymakers / Central Bank Signals
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Reserve Bank of Australia (RBA) officials have recently argued that the economy remains in a “good place” — with inflation drifting back toward its target band and labour-market conditions still relatively tight.
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Forecasts from institutions such as Deloitte Access Economics suggest real GDP growth of around 2.0% in 2025-26, rising slightly to 2.2% in 2026-27, underpinned by modest interest-rate cuts and gradually rising real wages — offering a plausible pathway back to growth over the next couple of years.
Why it matters: When central bankers and forecasters signal that the economy can handle gentle stimulus or modest rate cuts — without reigniting inflation — it bolsters confidence among investors, businesses, and households. It also helps anchor expectations for growth and borrowing costs.
⚠️ Who’s Still Struggling — and Why They’re Not Celebrating
Many Businesses — Especially Outside Services & Construction, and Potential Investors
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Even though business confidence is above neutral overall, a large share of firms remain reluctant to invest: in October only 37.4% thought it was a good time to expand/improve their business, while 34.9% said the next 12 months would be a bad time to invest.
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According to senior RBA officials, a persistent lack of private-sector investment over the past 18 months is a substantial drag on the economy — even if demand is modestly recovering.
Why it matters: Without strong capital expenditure, businesses risk bottlenecks — reduced capacity, slower innovation, limited hiring — which can derail a broad-based recovery, even if sentiment remains decent.
Households Vulnerable to Inflation, Interest Rates, and Cost Pressures
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Although consumer sentiment surged in November, it's fragile: earlier in 2025 some indicators suggested households were growing cautious again, partly due to uncertainty over future rate cuts and inflation.
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For many Australians — particularly younger renters, mortgage holders, or those on tight budgets — the lingering cost-of-living pressure, elevated housing costs and uncertainty about rate cuts may dampen enthusiasm for big-spending.
Why it matters: If confidence falters again — perhaps because of renewed inflation or job insecurity — household consumption (a critical driver of growth) could stall, undermining the fragile recovery.
Structural Risks — Capacity, Productivity, and Global Uncertainty
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The RBA has warned that demand currently sits at or slightly above potential output — the tightest recovery since the early 1980s. That means there is limited room for further expansion without pushing up inflation.
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Forecasters have also flagged a softening in productivity growth — which could slow output growth and cap improvements in real incomes over the medium term.
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Meanwhile, uncertain global conditions — trade frictions, shifting demand abroad, geopolitical volatility — remain a wildcard that could derail external demand, investment flows or supply-chain stability.
Why it matters: Even if domestic indicators hold up, these structural constraints limit how much the economy can grow — without rekindling inflation or other imbalances. That means any “good times” could be precarious or short-lived unless productivity and business investment pick up.
📊 What This Means for Australians — and What to Watch
For now, there’s reason for cautious optimism. The revival in consumer sentiment, rising business confidence (especially in services/construction), and supportive signals from policymakers all suggest Australia could be weathering a soft-landed recovery.
But the upswing remains uneven and fragile. Much hinges on whether businesses finally commit to investment, whether households feel secure enough to spend, and whether external risks (global demand, trade, inflation) stay calm.
What to watch next:
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Whether business investment levels pick up (capital expenditure, hiring, capacity expansion) or remain stagnant.
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Inflation, interest-rate policy and whether rates stay stable or move.
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Consumer-sentiment trends — is November’s spike a blip or the start of a sustained upswing.
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Global economic developments — trade, commodity prices, supply shocks — which could quickly reshape Australia’s external environment.
