Under-pressure consumers are weighing on the outlook for the Australian economy as highlighted in a fresh set of Reserve Bank forecasts.
In an otherwise largely unchanged set of predictions, Australia's central bank downgraded its growth forecasts to a low of 0.9 per cent annual growth through to December 2023.
This is down from the 1.2 per cent uptick in activity it forecast three months ago in the May Statement on Monetary Policy.
Economic activity is expected to rebound next year and into 2025, according to the August statement.
"GDP growth is forecast to remain subdued over the rest of 2023, with GDP per capita declining over this period," the statement read.
"The soft near-term outlook reflects subdued growth in household consumption as higher interest rates and cost-of-living pressures weigh on real disposable income."
Other tweaks to the forecasts were minor but the RBA now has inflation taking a little longer to fall back within target, at 2.8 per cent, by the end of 2025.
The central bank's May forecasts had headline inflation coming in at three per cent in mid-2025 - at the top of its two-three per cent target range.
The August forecasts have inflation coming in a little shy of its target, at 3.1 per cent, in mid-2025.
The relatively long wait to bring inflation back to target is about preserving job gains, with the RBA again flagging the "economic and social benefits" of keeping as many people in jobs as possible.
ANZ head of Australian economics Adam Boyton said the very slow return to target, a touch below the May forecasts, gave the statement a "slightly hawkish tinge".
But it was not enough to convince ANZ's economists to temper expectations of an extended pause, with the RBA labelling risks to the inflation trajectory "broadly balanced".
Threats to higher-than-expected inflation were consistent with earlier commentary and included sluggish productivity growth, a surge in wages growth, and profit margins widening even as prices fall.
The global picture is working in the other direction, with inflation falling faster than expected in many countries and China's economic recovery losing steam.
Question marks still hang over the consumer - spending could be resilient if the strength in the labour market sticks around, or alternatively, spending could tank as unemployment ticks up.
Those with a mortgage are also under immense stress, with the statement noting repayments are due to hit a high of 9.8 per cent of household disposable income by the end of the year.
The consumer watchdog delivered borrowers a win for market competitiveness in the mortgage space on Friday when it opted to stop the proposed merger of ANZ and Suncorp.
Australian Competition and Consumer Commission deputy chair Mick Keogh said the acquisition could "substantially lessen competition" in the home loan market.
"More than a third of Australian households have a mortgage, with loans totalling around two trillion dollars, illustrating how critical it is that competition in this market is not substantially lessened,” Mr Keogh said.
ANZ said it plans to appeal against the ACCC decision.
Competition Minister Andrew Leigh said the economy was increasingly dominated by "more and more large behemoths".
"We’ve seen over the last couple of decades an economy that has become more concentrated, potentially with adverse impacts on consumers and on workers," he told Sky News on Friday.
