Growth will remain subdued, but positive, through the remainder of 2023

Firms must continue to target resilient segments to ensure top-line growth in 2023

Firms should focus on resilient product and customer segments to maintain revenues and secure top-line growth given Australia’s restrictive credit costs and sticky inflation. B2C firms should prioritize high-income consumers, on-trade services, and incoming tourists, while B2B firms should target food manufacturers, public infrastructure projects, and mineral exploration and mining. MNCs should also continue to raise prices for popular product lines but expect greater resistance to such price increments relative to 2022. Additionally, firms should also consider optimizing their product portfolio by discontinuing unprofitable products that are not expected to see a rebound in demand in the near term.


The Australian economy is under pressure from rising interest rates and persistent inflation. In Q1 2023, the economy only grew by 0.3% QOQ, with limited sectors showing resilience and growth opportunities. Consumer spending remained stagnant, with growth of only 0.3% relative to Q4 2022, as households aimed to cut spending due to budgetary constraints. The household savings ratio, which measures how much income consumers can save, also fell from 4.4% in Q4 2022 to 3.7% in Q1 2023. This is the sixth consecutive quarter that the household savings ratio has fallen and reflects the difficulties consumers are facing in light of higher prices and interest rate pressures. 

Investment levels saw a modest expansion of 3.4% QOQ, primarily driven by the food production and transportation sectors. However, investments into private construction and mining continued to decline. On a positive note, exports continued to grow steadily, this time by 1.8% QOQ, buoyed by the tourism industry as well as food exports. 

Our View

Growth in 2023 will be constrained, as higher interest rates and persistent inflation dampen demand across various sectors of the economy. Consumer spending has been restrained by rising prices, higher loan repayments, and declining real wages. As a result, per capita spending has declined for two consecutive quarters. B2C firms are thus more reliant on tourist revenues, migrant inflows, and price hikes to maintain top-line growth due to decreases in sales volume among domestic consumers

Similarly, B2B firms will have limited sectors to rely on for consistent growth in the next 12 months. Resilient segments will include public infrastructure, food manufacturing, and mineral and energy mining. Government investments in transport and road infrastructure will drive demand for construction services, while high global demand for food and energy exports will ensure resilience in these sectors. However, other industries will continue to experience inconsistent—or even negative—growth, as higher interest rates and global manufacturing weakness hinder growth among Australian producers.

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