The Economy in 2026 - What it might look like

Clarke McEwan Accountants

The economy in 2026 - 6 possible transformations for Australia

By imagining for a few minutes that the year is 2026, we can get a better idea of how the Australian economy might evolve. Here six economists speculate on how the economy might change in the decade after 2016.

INTHEBLACK asked six leading economists to exercise their imaginations and invent a story of what Australia's economic evolution might look like by 2026. They invented economic environments with elements that we can already see, but with huge changes to jobs, businesses, cities and international relations.

Here, then, are six thought-provoking visions of possible economic changes ahead, each addressing a different element of the economy.

Automation, looking back from 2026 - Shane Oliver

In the past decade hundreds of thousands of jobs have disappeared in transport, professional services, manufacturing, government and other sectors as machines have taken over repetitive tasks.

In the past, such transformations occurred over decades, giving displaced businesses and workers time to adjust, and the technologies that have driven the process have given rise to new industries.

Shane Oliver

Shane Oliver

However, AMP Capital Investors chief economist Shane Oliver says the decade to 2026 has been different. The rapid speed of change has been traumatic for many - old jobs have been destroyed at a much faster pace than new ones have been created.

This has caused a growing gulf between those in well-paid jobs, immune to automation, and the rest.

With less disposable income around, economic growth has slowed and social tensions are increasing. There are growing demands for the government to use the tax and welfare systems to even the spread of income, and people are loudly advocating a shift to a four-day week to share jobs.

All is not gloom, however. Cafes, tourism operators, gyms, gene therapy clinics and other personal service providers are prospering, and new jobs and businesses are appearing all the time. Despite this, the period of dislocation has been painful for many.

The workplace, looking back from 2026 - Deborah Cobb-Clark

The plunge in office rents and property prices that began in 2021 shows little sign of letting up as the days of the corporate head office appear increasingly numbered.

Deborah Cobb-Clark

Deborah Cobb-Clark

While a core of employees continue to work in the same physical space, for years now a growing proportion has been taking advantage of advances in communications technology to work from remote locations - homes, shared office spaces and even cafes with dedicated work areas.

University of Sydney professor of economics Deborah Cobb-Clark, who anticipated this development a decade ago in 2016, says this, combined with the increasing automation of many jobs, is transforming the way we live and work.

People have more leisure time as their workload shrinks and an increasing number are freed from having to undertake the daily commute.

The new model of work is changing the structure and purpose of cities. Increasingly, the CBD as a work destination is a relic of the past and the "peak hour" pressure on transport networks is receding. People still flock to cities, but mostly for their amenity and social life rather than work.

Population ageing, looking back from 2026 - Stephen Koukoulas

Having already helped to usher in land taxes in the states, the Federal Government is now facing an even tougher political fight over plans to increase the retirement age to 70 years, introduce death duties and establish a HECS-style scheme for the aged pension.

Stephen Koukoulas

Stephen Koukoulas

Stephen Koukoulas of Market Economics says there is little choice. "It is a matter of dollars and cents," he says. "Community expectations are that the provision of services be held to a high level, and that is very expensive."

The nation's swelling ranks of retirees are driving ever-increasing demands for health care, community services and income support. The burden of this cost is falling on a shrinking share of working-age Australians.

The situation has called for radical solutions, and the government is now contemplating measures that 10 years ago would have been considered unthinkable - including a progressive scale of death duties and a "reverse-HECS" for pensions, under which a means-tested proportion of the welfare payments claimed by recipients are reimbursed to the government from their estate when they die.

"People want a decent level of government-provided services," Koukoulas says, "but without some serious action, there is a real risk of it becoming unaffordable."

Productivity, looking back from 2026 - Mardi Dungey

Australia's biggest economic achievement of the past decade has been to solve the conundrum of chronically low productivity.

Mardi Dungey

Mardi Dungey

By breaking down rigidities in the way work is conceived and structured, University of Tasmania professor of economics and finance Mardi Dungey says the nation has tapped into a rich pool of labour and expertise among those who in the past have been systematically excluded from the workforce, such as those with disabilities and chronic medical conditions.

By relaxing time constraints and instead conceiving jobs in terms of outcomes, the nation has opened up a swathe of opportunities for those who might take longer to complete a task, but can deliver results at least the equal of able-bodied workers.

Innovations like e-lancing and a more sophisticated approach to measuring production, particularly in the services, have helped drive the transformation.

Deflation, looking back from 2026 - Nicholas Gruen

Almost 20 years on from the global financial crisis, the Australian economy, like that of much of the developed world, continues to struggle to get out of second gear.

While Australia's record of 35 years of unbroken growth is remarkable, Lateral Economics principal Nicholas Gruen says there is little to celebrate from the last 10 years. The dark cloud of economic stagnation that settled over Europe in the wake of the GFC has spread Down Under.

Nicholas Gruen

Nicholas Gruen

The tough medicine policies forced on Europe's debtor nations (Italy, Spain, Greece) by Germany stoked deflationary forces that quelled growth there, and a similar dynamic has gripped Australia. Central banks around the world, including in Australia, have struggled in vain to lift the inflation rate.

Most workers have not had a real pay rise in years, and housing costs are claiming an increasing share of income, leaving fewer dollars left over for shopping and personal services. In turn, soft turnover has given firms little reason to hire more staff or make substantial investments.

In the past decade, annual growth has averaged 2.5 to 3 per cent, rather than 3 to 3.75 per cent. The result, says Gruen, has been to make the country 5 per cent poorer than it would otherwise have been.

Instead of acting to break out of this rut, successive governments have been complacent. "Now our unemployment rate is higher than the United Kingdom and the US, and there is no sense of urgency, or that something is seriously wrong," says Gruen. "It is a story of the great Australian complacency."

China's hard landing, looking back from 2026 - Saul Eslake

In the decade since 2016 the country has endured slowing population growth, a continued decline in the terms of trade and productivity, and an end to booming house prices. Yet the biggest shock has come from the liquidity crisis that crippled China's financial system.

Saul Eslake

Saul Eslake

The warning signs were already appearing in the middle of the last decade, says independent economist Saul Eslake, when the country's banking system developed some of the worrying characteristics of the American banking system before the global financial crisis hit.

"The GFC was not primarily caused by a huge increase in bad mortgage loans, but by a wholesale run on funds tied up in securities," Eslake said at the time.

"China's banking system has taken on some of that character. China's banking system has become much more dependent on the types of funding [securities] that brought down the Western banking system [in the GFC]," he adds.

The Asian country's massive foreign exchange reserves, worth around US$3 trillion, were of little help in what became a solvency crisis. For Australia, whose trade dependency on one nation was greater than at any time since the 1950s, the economic consequences have been severe.

By Clarke McEwan September 9, 2025
20% reduction in student debt The reduction is expected to benefit more than 3 million Australians and remove over $16 billion in outstanding debt. The 20% reduction will be automatically applied to anyone with the following student loans: · HELP loans (eg, HECS-HELP, FEE-HELP, STARTUP-HELP, SA-HELP, OS-HELP) · VET Student loans · Australian Apprenticeship Support Loans · Student Start-up Loans · Student Financial Supplement Scheme. The reduction will be based on the loan balance at 1 June 2025, before indexation was applied. Indexation will only apply to the reduced balance. The ATO will apply the reduction automatically on a retrospective basis and will adjust the indexation that is applied. No action is needed from those with a student loan balance and the Government has indicated that you will be notified once the reduction has been applied. If you had a HELP debt showing on your ATO account on 1 April 2025 but you paid the debt off after 1 June 2025 then the reduction will normally trigger a credit to your HELP account. If you don’t have any other outstanding tax or other debts to the Commonwealth, then the credit should be refunded to you. The HELP debt estimator is a useful tool to get an idea of the reduction amount, please reach out if you need any help in working out eligibility. Changes to repayments The Government has also modified the way that HELP and student loan repayments operate, primarily by increasing the amount that individuals can earn before they need to make repayments. The minimum repayment threshold for the 2025-26 year is being increased from $56,156 to $67,000. The threshold was $54,435 for the 2024-25 year. Under the new repayment system an individual will only need to make a compulsory repayment for the 2025-26 year if their income is above $67,000. The repayments will be calculated only against the portion of income that is above $67,000. Repayments will still be made through the tax system and will typically be determined when tax returns are lodged with the ATO. For many people the change in the rules will mean they have more disposable income in the short term, but it will take longer to pay off student loans. The main exception to this will be when an individual chooses to make voluntary repayments.
By Clarke McEwan September 9, 2025
The Productivity Commission (PC) has been tasked by the Australian Government to conduct an inquiry into creating a more dynamic and resilient economy. The PC was asked to identify priority reforms and develop actionable recommendations. The PC has now released its interim report which presents some draft recommendations that are focused on two key areas: · Corporate tax reform to spur business investment · Where efficiencies could be made in the regulatory space (ie, cutting down on red tape) The interim report makes some interesting observations and key features of the draft recommendations are summarised below. Corporate tax reform The PC notes that business investment has fallen notably over the past decade and that the corporate tax system has a significant part to play in addressing this. The PC is basically suggesting that the existing corporate tax system needs to be updated to move towards a more efficient mix of taxes. The first stage of this process would involve two linked components: · Lower tax rate: businesses earning under $1 billion could have their tax rate reduced to 20%, with larger businesses still subject to a 30% rate. · New cashflow tax: a net cashflow tax of 5% should be applied to company profits. Under this system, companies would be able to fully deduct capital expenditure in the year it is incurred, encouraging investment and helping to produce a more dynamic and resilient economy. However, the new tax is expected to create an increased tax burden for companies earning over $1 billion. Cutting down on red tape The interim report notes that businesses have reported spending more time on regulatory compliance – this probably doesn’t come as a surprise to most business owners who have been forced to deal with multiple layers of government regulation. Some real world examples include windfarm approvals taking up to nine years in NSW while starting a café in Brisbane could involve up to 31 separate regulatory steps. The proposed fixes include: · The Australian Government adopting a whole-of-government statement committing to new principles and processes to drive regulation that supports economic dynamism. · Regulation should be scrutinised to ensure that its impact on growth and dynamism is more fully considered. · Public servants should be subject to enhanced expectations, making them accountable for delivering growth, competition and innovation. These are simply draft recommendations contained in an interim report so we are a long way from any of these recommendations being implemented. However, the interim report provides some insight into areas where the Government might look to make some changes to boost productivity in Australia. The PC is inviting feedback up until 15 September on the interim report before finalising its recommendations later this year.
By Clarke McEwan September 9, 2025
Back in March this year the Government announced its intention to ban non-compete clauses for low and middle-income employees and consult on the use of non-compete clauses for those on higher incomes. The Government has indicated that the reforms in this area will take effect from 2027. This didn’t come as a complete surprise as the Competition Review had already published an issues paper on the topic and the PC had also issued a report indicating that limiting the use of unreasonable restraint of trade clauses would have a material impact on wages for workers. Treasury has since issued a consultation paper, seeking feedback in the following key areas: · How the proposed ban on non-compete clauses should be implemented; · Whether additional reforms are required to the use of post-employment restraints, including for high-income employees; · Whether changes are needed to clarify how restrictions on concurrent employment should apply to part-time or casual employees; and · Details necessary to implement the proposed ban on no-poach and wage-fixing agreements in the Competition and Consumer Act. Treasury makes it clear that the Government is not planning to change the way the rules apply to restraints of trade outside employment arrangements (eg, on sale of a business) or change the use of confidentiality clauses in employment. If the proposed reforms end up being implemented, then this could have a direct impact on a range of employers and their workers. Existing agreements will need to be reviewed and potentially updated. However, it is too early at the moment to guess how this will end up, we will keep you up to date as further information becomes available.
By Clarke McEwan September 9, 2025
On 1 July 2025 the superannuation guarantee rate increased to 12% which is the final stage of a series of previously legislated increases. Employers currently need to make superannuation guarantee (SG) contributions for their employees by 28 days after the end of each quarter (28 October, 28 January, 28 April and 28 July). There is an extra day’s allowance when these dates fall on a public holiday. To comply with these rules the contribution must be in the employee’s superannuation fund on or before this date, unless the employer is using the ATO small business superannuation clearing house (SBSCH). The ATO has been applying considerable compliance resources in this space in recent years which can have an impact on both employees and employers. Employers To be eligible to claim a tax deduction on SG contributions the quarterly amount must be in the employee’s super account on or before the above quarterly due dates. The only exception to this is where the employer is using the ATO SBSCH. In that case a contribution is considered made provided it has been received by the SBSCH on or before the due date. Employers using commercial clearing houses should be mindful of turnaround times. Commercial clearing houses collect and distribute employee contributions and may be linked to accounting / payroll software or provided by some superannuation platforms. Anecdotally it seems that turnaround times for some clearing houses could be up to 14 days, so it is recommended that employers allow sufficient time before the quarterly deadlines when processing their employee SG contributions. If these deadlines are missed (yes even by a day!) that will trigger a superannuation guarantee charge (SGC) requirement which will result in a loss of the tax deduction and other penalties. The SGC requirements are outlined in the ATO link below: The super guarantee charge | Australian Taxation Office Employers do have the option to make SG payments more frequently than quarterly and this is something that employers will need to become used to if the proposed ‘payday’ superannuation reforms become law. This change is proposed to commence from 1 July 2026 and would require SG to be paid at the same frequency as salary or wages. There is some discussion on the payday super proposal at this link (noting that this is not yet law). The SBSCH will close at this time so employers using this service should start to consider transitioning to a commercial clearing house, please let us know you would like assistance with this. Employees It is recommended that you regularly check your superannuation fund statements and reconcile employer contributions to the amounts listed on your pay slips. Where SG contributions are not received on time (or at all!) employees are encouraged to discuss this first with their employer. Should this not result in a satisfactory conclusion, employees can consider bringing this to the attention of the ATO. There is some helpful discussion on this process at the following link .
By Clarke McEwan September 9, 2025
In a widely anticipated move on 12 August 2025, the Reserve Bank of Australia (RBA) delivered a 25 basis point rate cut, lowering the cash rate from 3.85% to 3.60%, the third reduction this year. This rate is now at its lowest level since March 2023 signaling renewed monetary easing amid persistent economic fragility. Governor Bullock emphasised that the decision was unanimous and that larger cuts weren’t considered. She did however leave the door open for further action if conditions warrant it. The unanimous decision was made because: · Headline inflation has eased to 2.1% year on year and the RBA’s preferred trimmed mean measure sits at just 2.4–2.7%, comfortably within the desired 2–3% range. So, it’s now within target. · There’s still soft economic growth, quarter 1 saw GDP grow 0.2% and unemployment has gone up slightly to roughly 4.3%. This is a welcome move for many with flow-on impacts across a wide section of the community. Borrowing and mortgages: a borrower with a $600,000 mortgage can expect monthly repayments to fall by around $89, saving over $1,000 annually. Refinancing: the latest cut has triggered a wave of refinancing, Canstar estimates monthly savings of around $272 on a $600,000 loan, potentially taking years off the loan term and saving tens of thousands in interest expenses. Housing and lending: the cut may revive home buying sentiment, though the risks of swelling property prices remain. Borrowers and buyers alike are feeling the relief. Currency and markets: the Australian dollar did weaken moderately following the decision. On the ASX 200, financial stocks, particularly the Commonwealth Bank, took a hit as investors fretted over shrinking interest margins. While there are always winners and losers with a decision like this, for many Australians this is a positive change. Either way, please do reach out if we can help you understand how to best manage your debt, exploring refinance options, adjust pricing models or evaluating investment readiness.
By Clarke McEwan September 5, 2025
Why is good bookkeeping so vital for your financial management? We’ve got some top hacks for maximising your bookkeeping, and the options for outsourcing this job to the professionals. #SmallBiz #SMB #accounting #bookkeeping
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