The outlook for the economy was largely upbeat, with the 48-year low 3.9 per cent unemployment supporting strong consumption, along with people spending more of their incomes, dipping into a $270 billion pool of money stashed away since January 2020 and getting higher take-home pays.

Westpac chief economist Bill Evans expects about $15 billion–$20 billion in added spending capacity over the remainder of the year from fewer savings.

Cloudy outlook

The outlook becomes cloudy by December and into 2023, however, as inflation and rising interest rates start to bite and slowing global growth acts as a headwind, making continued strong growth results more difficult.

With spiking gas prices dominating Labor’s first fortnight in office and prompting the first round of criticism from the opposition, Macquarie Bank senior economist Justin Fabo warned of the consequences.

“Higher energy prices – gas and electricity – will be a drag for most businesses and households,” Mr Fabo said.

KPMG chief economist Brendan Rynne said the gas crisis was driven by domestic factors such as a cold snap and increased pressure on gas electricity generation while 6000MW of coal plants were stood down. It was also affected by overseas factors such as the market upheaval caused by the war in Ukraine.

“The likelihood is the domestic factors will be short-lived, but the global factors won’t be – which means gas costs will increase probably by a similar level as electricity costs are set to rise by, adding inflationary and margin pressures to the business community,” Dr Rynne said.

The Australian Energy Regulator approved price increases of up to 18 per cent in NSW and 12 per cent in Queensland from July 1.

Mr Fabo said households would be worse off with higher gas and electricity prices. “If utilities prices rise circa 20 per cent over a year, that’s a 1 percentage point boost to inflation and a drag on real income growth,” he said.

Deutsche Bank chief economist Phil O’Donaghoe said higher gas prices would add about half-a-percentage point to inflation by year’s end, while AMP Capital chief economist Shane Oliver tipped a rise of 0.2 of a percentage point. Dr Oliver also said higher prices could knock off up to 0.2 percent from GDP.

Mr Fabo said utility bills accounted for a higher share of lower-income households, who also had not built up the “excess savings” buffers of higher income households.

Barrenjoey chief economist Jo Master said households spend on average $263 a month on electricity, gas and other fuel bills. “An increase of 5 per cent to 10 per cent equates to $13.20 to $26.30 per week, which will have to be found from other parts of the household budget,” Ms Masters said.