CBA Warns Australian Economic Growth Could Slow to 1 Per Cent
Australia’s largest bank has warned the economy is facing growing pressure, with weaker growth and rising unemployment expected as the country prepares for another interest rate increase.
In a research report released on Monday, Commonwealth Bank (CBA) said the Middle East conflict, high interest rates and weak productivity were weighing heavily on the economy.
The bank now expects economic growth to slow to just 1 per cent by mid-2027, down from its previous forecast of 1.8 per cent.
The warning comes ahead of a widely expected fifth interest rate rise this year, which could add further pressure on households already struggling with higher living costs and mortgage repayments.
CBA economists said ongoing global and domestic challenges were keeping inflation elevated, including weak productivity, supply disruptions and heavy investment in artificial intelligence infrastructure.
They also pointed to rising household spending, which continues to put pressure on prices, despite high interest rates.
The bank expects unemployment to climb to 5.1 per cent, above its earlier forecast of 4.8 per cent. It also noted that business profits had weakened and the labour market was showing signs of slowing.
Construction of data centres and shortages of computer chips are adding to inflationary pressures, although investment in artificial intelligence is helping support economic activity.
CBA expects the economy to remain weak for longer than previously anticipated, with growth not reaching 2 per cent until the second half of the 2028 financial year.
A potential benefit of another rate rise could be a stronger Australian dollar, which would make imported goods cheaper and help reduce inflation.
Barclays said the Reserve Bank of Australia could continue raising rates beyond November if economic data required further action.
However, CBA warned that expected interest rate cuts later next year are far from guaranteed.
The bank’s economists have retained forecasts for rate cuts in August and November 2027, but said elevated inflation could change that outlook.
For Australian households, the latest warning signals that high borrowing costs and economic uncertainty may persist well into next year.
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Source : 9 News
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