Jan 19, 2024  | Tags: 2024, trends, Economy

Our insights

Observing economic trends can be one of the best ways to predict where the markets are headed in 2024.

But as always, it remains very much an imprecise science.

It was a rollercoaster ride for investors in 2023 with the Australian market gaining 7 per cent in the first five weeks of the year.

But an exceptionally bumpy period between March and October saw it fall to its lowest levels in 12 months before a whirlwind finish restored the faith of investors.

Despite no shortage of doomsayers, the local economy prospered despite the wars in Ukraine and Palestine, rising interest rates at home, a bond sell-off on the markets and the price of oil dipping below US$80/barrel.

That momentum is likely to be carried into the new year but for how long will depend on so many factors both at home and abroad.

Key drivers of Australia’s economy in 2024

Population growth

The Labor government has already flagged it is ready to put the brakes on its immigration drive which welcomed more than 500,000 people to our shores in 2023.

Its intention is to bring migration back to “more sustainable levels”.

It is hoped that this will begin to have an impact on the heated property and rental markets, as housing affordability remains a key concern.

It has also eased Australia’s labour shortages by boosting our number of skilled and unskilled workers.

And it has contributed to Australia’s economic growth and business revenue.

Labour market

Unemployment crept to an 18-month high of 3.9% in November, rising off its lowest ebb for several decades.

It rose despite the creation of 61,500 new jobs and was the result of a large increase in the number of people seeking work.

While the national position remains incredibly strong via this metric, there is a belief that the labour market may struggle to employ the enormous number of migrating jobseekers.

The RBA is expecting the unemployment rate to rise beyond 4% in 2024 as the economy weakens although this would remain manageable, given the sharp rise in interest rates.

Budget flexibility

Compared with much of the western world, Australia’s coffers are in excellent shape.

The IMF measured Australia’s gross debt as a percentage of its GDP at 51.1%.

This compares extremely favourably with Japan (255.2%), Italy (143.7%), US (123.3%), France (110%), Spain (107.3%), Canada (106.4%) and the UK (104.1%).

Australia is forecast to further shrink that figure to 34% by 2028.

The strong balance sheet reduces pressure on the economy and gives the government much flexibility to battle any economic downturns.

Clean energy

Australia is rich in resources in demand for the global transition to clean energy.

This should stimulate the private sector through stronger business investment and lead to higher government tax receipts, further boosting national coffers.

Employment growth in the mining sectors is also anticipated.

Major risks for Australia’s economy in 2024

Infrastructure and housing

High migration numbers have put significant stress on infrastructure as well as the housing and rental markets.

This has triggered some negative sentiment from a social point of view which inevitably flows through to consumer spending.

Interest rates

While interest rates remain well below the record highs of the 1980s, there appears little appetite for many more rises after 13 bumps in 18 months.

That is despite the risk of oil prices further fuelling inflation over the next year, leaving the RBA with a delicate balancing act to manage.

Productivity

Australia is flirting with recession and is already in a ‘per-capita GDP recession’ having returned two consecutive quarters of negative per-capita GDP growth.

The country now faces a productivity challenge with levels declining to seven-year lows.

Global influences

The US election in November and a potential shift at the White House will have a significant impact on the world economy.

But it is not the only election of consequence in 2024 with the UK, Russia, India, Taiwan, Indonesia and the European Union all having the potential to make markets jittery.

Developments between Israel and Palestine should also be monitored.

Investment strategies for 2024

Investing at home looks to be offering up some attractive opportunities as we head into 2024.

Australian equities remain significantly discounted compared to other markets.

And the Australian government’s strong fiscal position makes its bonds a preferable choice to those from developed markets.

Superannuation funds may also be tweaked with a similar view.

Superannuation rules are fluid with compulsory contributions increasing to 11.5% on 1 July 2024, increasing to 12% by 1 July 2025.

Meanwhile, Australian property is expected to continue to perform strongly, with the Adelaide market predicted to grow by as much as eight percent (read a more detailed wrap of property predictions for 2024 here).

Get advice today

Following the trends and helping our clients adapt to change is a key part of our role at Calder Wealth Management.

It is important to have your own wealth strategy, with a long-term, diversified approach that can ride out the inevitable bumps that can come from market fluctuations.

Calder are wealth(l) experts who can help you create a well-balanced investment plan that aligns with your financial goals, time horizons and risk tolerance level.

It is the savviest way to establish, manage and protect your investment portfolio.

We can act as your financial mentor all the way through to your retirement.

Whatever your financial goals, we’ll work with you to devise and implement sound investment strategies.

No-one should do without quality financial advice from someone personally invested in their wealth goals. 

We pride ourselves on leading our clients into the future with structure, financial stability and confidence.

Contact us today to discuss all of your financial needs and concerns.

Written by Liz Wilson

The information contained in this article is general in nature and does not take into account your personal situation. You should consider whether the information is appropriate to your needs, and where appropriate, seek professional advice from a financial adviser.

Taxation, legal and other matters referred to on this website are of a general nature only and are based on Calder Wealth Management’s interpretation of laws existing at the time and should not be relied upon in place of appropriate professional advice. Those laws may change from time to time.

Calder specialises in wealth management with a focus on advice, investment, sustainability, insurance and finance.