OECD economic outlook tips miserly Australian GDP growth of 1.9% in 2025, 2.2% in 2026

Forecasts for growth in the Australian economy have been downgraded by a major international body, with the OECD urging more action on housing.

The OECD has downgraded expectations for growth in Australia’s economy, urging the government to address the “housing affordability crisis” and accelerate the transition to net zero.

Australia’s economy growth, measured by GDP, is tipped to reach 1.8 per cent in 2025, down from its March outlook of 1.9 per cent.

Tuesday’s OECD forecast of 2.2 per cent growth in 2026 were slightly better than March interim figure of 1.8 per cent, however lower than the 2.5 per cent projected in December.

The international body urged the Albanese government to address “longer term” demographic, housing and climate challenges, as well action to make the tax system more efficient.

“A range of policy actions, including easing zoning restrictions, is needed to strengthen competition and productivity, as well as to raise housing investment to reverse the longstanding decline in housing affordability,” it said.

GDP growth is expect to hit reach a measly 1.9 per cent growth, the OECD has tipped in its latest economic outlook. Picture: Gaye Gerard/ NewsWire

The report also identified both housing and reaching net zero as key action points.

“Key structural policy priorities are to address the housing affordability crisis by boosting supply and to accelerate progress toward net zero carbon emissions, especially in transport and industry,” it read.

“This should be complemented by other policies to strengthen investment, including improved incentives for house building, especially for social housing, and public investment to improve electricity grid connections.”

On tariffs, the OECD noted the impact of global trade tensions had worsened business and consumer sentiment, while Australia’s “exposure to US tariff increases is limited” with exports accounting for about 5 per cent of total exports.

But it said the domestic economy could be hammered by dropping commodity prices.

The main sources of risk would be from import demand in China – Australia’s largest export market.

“The impact of global trade tensions on the Australian economy is more likely to come via the depressing effect of higher tariffs and policy uncertainty on investment worldwide, manifested in part by lower prices for iron ore, coal and natural gas,” it read.

The OECD report additionally flagged that inflation “will remain close to target,” averaging 2.4 per cent across both years.

The “slump” in disposable incomes had also “bottomed out” and have been on the rise since late-2023, however were significantly behind 2022 levels.

Jim Chalmers said the downgraded expectations reflected global ‘uncertainty, unpredictability and volatility’. Picture: NewsWire / Martin Ollman

Jim Chalmers said the downgraded growth reflected the “uncertainty, unpredictability and volatility” currently plaguing the international economy.

“This is a stark reminder of the risks posed by tariffs and trade tensions, conflict and fragmentation,” the Treasurer said.

“We aren’t immune from all of this global uncertainty but we are well placed and well prepared because of the progress Australians have made together in our economy.

“With lower inflation, low unemployment, positive growth and falling interest rates the OECD is making it clear that the Australian economy is turning a corner as the rest of the world takes a turn for worse.”

Mr Chalmers also forecasted that Wednesday’s economic check-up would reflect the “global economic headwinds” as well as the impact of a string of natural disasters that have hit Australia’s bottom line by $2.2bn.

Australia’s GDP numbers for the March quarter, to be released by the Australian Bureau of Statistics at 11.30am on Wednesday, is tipped to grow by a sluggish 0.4 per cent.

Originally published as OECD economic outlook tips miserly Australian GDP growth of 1.9% in 2025, 2.2% in 2026