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Global Economic Outlook – September 2022 Businesses still signalling rising investment, Inflationary pressure easing government spending set to moderate but still elevated A rebound in business investment is likely in the near term, Oil prices have eased in recent months, but overall energy as the impact of the recent floods on building construction prices remain very high. The war in Ukraine has also put activity ease and firms continue to take advantage of tax pressure on food prices globally and those pressures have incentives. The ongoing recovery in services exports, been exacerbated in Australia due to the floods disrupting together with a recovery in inward migration, will also agricultural activity. In addition, escalating construction costs encourage firms to expand capacity. But overall, we expect and rising housing rents are providing a significant boost to momentum to moderate as the environment deteriorates. headline inflation. Taken together the headline inflation rate And after two years of outsized increases in government reached 6.1% in Q2, and trimmed mean inflation rose to spending, we expect expenditure to fall back slightly, as 4.9%, the highest rate for each series since 1991. emergency pandemic expenditure finally comes to an end. Businesses are reporting that purchase cost are continuing Overall, GDP growth momentum is expected to ease to surge, consistent with inflation increasing further in the going through H2 2022, to a trough in mid-2023. But we near term. The ending of the Government’s fuel excise still expect the economy to escape a recession, given its reduction is set to boost inflation to a peak of more than positive fundamentals. 7% in Q4. Thereafter, the modest easing in energy prices, the unwinding of flood impacts on food price, and softening demand momentum should see inflation moderate. Chart 27: Quarterly GDP growth by component, Australia Chart 28: Australia’s CPI inflation 7.5% 7% 5.0% 6% 5% 2.5% 4% 0% 3% ercent hange, y/y P -2.5% % c 2% -5.0% 1% -7.5% 0% -10.0% -1% Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020 2022 2018 2019 2020 2021 2022 Household consumption Government spending Change in inventories GDP Headline Trimmed mean Private investment Net exports Statistical discrepancy Source: KPMG Economics, Australian Bureau of Statistics, Macrobond. Source: KPMG Economics, Australian Bureau of Statistics, Macrobond. © 2022 Copyright owned by one or more of the KPMG International entities. KPMG International entities provide no services to clients. All rights reserved. 29

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