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As Australia enters 2025, the nation faces a mix of challenges and opportunities. Here's a comprehensive overview of what to expect:
Federal Election
As the 2025 federal election approaches, Opposition Leader Peter Dutton has adopted a campaign strategy reminiscent of Trump's, challenging voters to consider if they're "better off than four years ago." This tactic gains traction from the recent Mid-Year Economic and Fiscal Outlook (MYEFO) 2024-25, which revealed a $21.8 billion increase in the budget deficit over the next four years. Meanwhile, Prime Minister Albanese is working to showcase his government's positive impact. The Labor government has faced scrutiny for increasing government advertising spending to $251 million, allocating significant sums to defence force recruitment ($61.4 million), the Voice Referendum ($26.7 million), and a campaign for Stage 3 tax cuts ($19.4 million) that required no action from taxpayers.
Economic Outlook
The Reserve Bank of Australia remains cautious about inflation. Major banks predict rate cuts between February and June 2025.
Economic indicators show:
Living standards grew by only 0.2% in the September quarter
Discretionary spending increased by just 0.1%
Australia's economy grew by 0.8% over the past year, the lowest since December 2020
The economy is heavily reliant on government spending
Policy Changes
The year 2025 brings several significant policy changes that will impact various sectors of Australian society.
From 1 January 2025, all Australian tax residents must provide clearance certificates for property sales, regardless of value, with a 15% withholding rate for non-compliance.
The Superannuation Guarantee rate reaches its final planned increase to 12% on 1 July 2025, bolstering retirement savings for workers. Simultaneously, parents receiving Paid Parental Leave will benefit from additional superannuation contributions, calculated at 12% of their Paid Parental Leave payments.
From 1 January 2025, the automotive industry faces new challenges with the introduction of vehicle emissions standards, requiring manufacturers to meet specific CO2 targets across their fleet, though a flexible compliance system allows for credit trading and a two-year grace period.
Lastly, wage theft becomes a criminal offense 1 January 2025, with severe penalties for intentional underpayment, including fines up to triple the underpayment amount and additional penalties up to $7.825 million, marking a significant shift in employer accountability.
Global Trade Impact
President-elect Trump's inauguration on 20 January 2025, may lead to significant trade measures, including:
25% tariffs on all imports from Mexico and Canada
Additional 10% tariff on Chinese imports
While Australia is not directly targeted by Trump's proposed tariffs, the country could face substantial indirect effects due to its strong economic ties with China. With China accounting for 26% of Australia's total international trade in 2023, any slowdown in the Chinese economy resulting from U.S. trade restrictions could negatively impact Australian exports. Trump's proposed 10% additional tariff on Chinese imports could lead to broader regional economic instability. As China is a major economic player in the Asia-Pacific region, any significant disruption to its economy could have ripple effects throughout the area, potentially affecting Australia's trade with other regional partners.
The Final Word
As 2025 unfolds, Australia's economic resilience will be tested by both domestic and international factors. Businesses and individuals who stay informed and adaptable will be best positioned to navigate the complexities and capitalize on emerging opportunities.