Bank Cuts Australian Growth Forecast to 1%

Commonwealth Bank now expects the economy to slow sharply by mid-2027 while unemployment climbs.

Updated on Nov. 2, 2026 in Employment

Bank Cuts Australian Growth Forecast to 1%

Live Poll

Do you expect your household finances to be worse off next year?

Commonwealth Bank of Australia cut its mid-2027 growth forecast to 1 per cent from 1.8 per cent, and raised its unemployment peak forecast to 5.1 per cent by the end of 2027 from 4.8 per cent. Unemployment currently stands at 4.7 per cent.

Why it matters

The revised outlook points to a weaker jobs market for Australians as growth slows and rates are expected to rise. The bank attributes the slowdown partly to the escalating Middle East conflict pushing Brent crude up more than 50 per cent since July.

The forecast revision cuts mid-2027 growth to 1 per cent from 1.8 per cent and lifts the unemployment peak to 5.1 per cent from 4.8 per cent, against a current rate of 4.7 per cent. Headline inflation was 4.3 per cent in the year to September, and the outlook beyond these figures remains uncertain.

The players

Commonwealth Bank of Australia

Australia's largest home lender and one of its four major banks, whose economists publish closely watched economic forecasts.

Reserve Bank of Australia

Australia's central bank, responsible for setting the cash rate and managing inflation and employment.

The details

The bank also expects the Reserve Bank of Australia to lift rates for a fifth time this year, with the cash rate held at 4.85 per cent after the planned hike. Home prices have fallen 8 per cent from their peak across the capital cities, while household spending grew 1.8 per cent in the June quarter.

June quarter: household spending growth reached 1.8 per cent.
July: Commonwealth Bank issued its previous forecast.
September: headline inflation reached 4.3 per cent year on year.
End of 2027: unemployment is forecast to peak at 5.1 per cent.
Mid-2027: growth is forecast to fall to 1 per cent.

Macro View

The revised forecast fits within a Reserve Bank of Australia rate-hike cycle, with a fifth increase expected this year as inflation runs above target. Productivity growth remains almost non-existent, which the bank cites as a constraint on how long the economy can sustain its current pace.

Households face a weaker jobs market and higher borrowing costs as the Reserve Bank is expected to lift rates again. The outlook suggests household spending growth could slow to a low of 0.7 per cent next year.

The takeaway

Watch unemployment and interest-rate decisions closely over the next year, as they will shape household budgets. The forecast suggests economic conditions may stay tight before growth returns to trend in the second half of 2028.