As part of its economics program, FWPA held an Economic Outlook Webinar in April 2026, outlining the key challenges facing Australia’s economy, including the impact of global uncertainty on energy prices. The outlook covered major macroeconomic indicators, including economic growth, the Consumer Price Index (CPI), unemployment, and interest rates, which are critical for the industry to assess short- and medium-term conditions and inform strategic business planning.
Forecast of key economic indicators
FWPA analysis indicates that economic growth is expected to ease following its peak of 2.6% in December 2025. Private demand and investment will remain key drivers of growth, with strong contributions from housing, health, and education services.
Higher fuel prices are likely to reduce spending on transport-related activities, particularly if global conditions continue over the next 6 to 12 months. This will flow through to discretionary sectors such as recreation, leisure, retail, and hospitality. In addition, cost pass-through from producers to consumers is expected to further weigh on household budgets, reducing discretionary consumption.
Overall, economic activity is projected to recover by late 2028 as broader conditions improve and short- to medium-term pressures ease (Figure 1).
Fuel price increases observed in March 2026 are expected to flow through to the broader economy by June 2026. The study projects inflation to rise to 4.7%, up from 4.2% (Figure 2), reflecting the lagged impact of higher energy costs across production, transport, and household expenses.
Headline inflation (all groups) is now expected to return to the Reserve Bank of Australia’s 2–3% target band by June 2028 at the earliest—around four quarters later than previously anticipated. This delay is driven by sustained fuel price pressures and the typically gradual adjustment process required for prices to stabilise across the economy.
The labour market remains tight, with unemployment holding at relatively low levels. In its latest Statement on Monetary Policy (February 2026), the Reserve Bank of Australia (RBA) noted that many businesses continue to face challenges in finding suitably skilled workers. This persistent labour shortage is driving strong wage growth, which is adding to business costs and, in turn, contributing to inflationary pressures (Figure 3).
FWPA study shows that over the next three years, unemployment is expected to remain below 5%, with a modest increase to around 4.6% by mid-2027 as the effects of higher interest rates continue to flow through the economy. While this represents some easing in labour market tightness, conditions are still likely to remain constrained by historical standards.
At the same time, increasing cost pressures, particularly from fuel and energy, are reinforcing the inflation outlook. As a result, the RBA’s cash rate is expected to increase further in the near term, reflecting the need to contain inflation. Updated forecasts also indicate that the RBA is likely to hold the cash rate at around 4.35% for longer than previously anticipated (Figure 4), signalling a more prolonged period of restrictive monetary policy. This combination of tight labour supply, rising wage costs, and sustained interest rates will continue to shape business conditions, with firms needing to balance cost management, pricing strategies, and investment decisions in a slower-growth environment. (Figure 4)
Domestic softwood demand and imported wood products
Total softwood sales are projected to remain relatively steady at around 2.6 million m³ year-on-year, equivalent to approximately 220,000 m³ per month. Note that cumulative data are from FWPA members, which account for around 80-85% of the market share, based on official figures.
Demand for structural timber—both treated and untreated, and primarily used in residential construction—is also expected to remain stable. This reflects capacity constraints in detached housing, alongside a gradual shift toward multi-unit and mid-rise developments. Packaging demand is forecast to increase modestly in 2026, following the peak in economic growth in late 2025, before moderating in 2027 and 2028 in line with broader economic conditions (Figure 5).
Imports of wood products into Australia, based on HS code of Chapter 44, with a particular focus on major trading partners such as China, are projected to increase by around 2–3% over the next three years. Total import value is expected to rise from approximately $2.8 billion in the 2025 calendar year to around $3.0 billion by 2028.
Key product categories driving this growth include plywood, LVL, builders’ joinery, and sawnwood. These products continue to meet domestic demand, particularly in construction and manufacturing supply chains where imported materials complement local production. It should be noted that reported values may vary across data sources due to differences in valuation methods, particularly whether imports are measured on a free on board (FOB) or cost, insurance, and freight (CIF) basis (Figure 6).
The FWPA Economic Outlook Webinar also highlighted emerging opportunities, despite ongoing challenges. These include strengthening domestic demand and the growing role of timber in low-carbon construction and sustainable building solutions.
A recording of the webinar is available on request from FWPA.
