Economists build their forecasts via the inputs to demand. But when population and productivity are moving this fast, a different approach is needed. In this latest note, Tim Toohey, Head of Macro and Strategy, looks at how net migration, the NDIS and infrastructure boom have juiced the Australian labour market. Given the outlook for all three, he lowers his 2025 economic growth forecasts.

In the dark arts of economic forecasting, economists typically start the process by forecasting the expenditure components of the economy, consumption, housing investment, business investment, government demand and net trade. Most forecasters spend their time focused on the impact that interest rates, tax policies, lumpy investment projects, external demand factors and exchange rates might have in shifting the path of aggregate demand. Population growth, which typically deviated only modestly around its historical average outside of the pandemic and major recessions, was typically a second order focus. Not anymore. In 2024-25 it takes central stage, and it threatens to upend forecasts for economic recovery.

Read Tim’s paper here.