Australia is bracing for continued economic slowdown.

Australia faces another challenging year marked by weak economic growth, with experts warning conditions will hit company profits, elevate unemployment, and potentially push the federal budget into deficit. 

The Australian Bureau of Statistics reported a modest 0.2 per cent increase in Real GDP for the December quarter, with annual growth decelerating to 1.5 per cent from 2.1 per cent, marking the slowest pace outside the pandemic era since 2000.

Treasurer Jim Chalmers highlighted the impact of the sluggish growth on future tax revenues, casting doubt on the possibility of continuing multi-billion dollar tax windfalls for the government. 

This comes at a time when considerations for pre-election spending are on the table, raising concerns over their potential effects on the budget's bottom line.

The slowdown is attributed to reduced household spending on non-essential items, a decline in residential construction, and less investment in machinery and equipment. 

Despite these factors, the economy avoided contraction, supported by government spending and a significant drop in imports.

Economists and financial strategists anticipate continued sub-trend growth and suggest that easing inflationary pressures could lead to interest rate cuts later in the year. 

Meanwhile, experts caution against expecting a quick fix, noting the challenges posed by a softer labour market and reduced pandemic-era savings.

The government's fiscal strategy has come under scrutiny, with warnings against further spending increases. 

Many argue that with inflation declining more rapidly than anticipated and wage growth slowing, there may be less need for the current tight monetary policy settings.

Amid these economic pressures, Australia's households have been adjusting, evidenced by a slight increase in the savings rate and a rise in real household disposable income for the first time in two years. 

However, the burden of personal income tax remains high, with bracket creep pushing more earnings into higher tax brackets.