Revised GDP growth projection and the outlook for softwood sales volumes
The latest headline CPI data showed inflation reaching 3.8% year-on-year in December 2025, prompting the Reserve Bank of Australia (RBA) to increase the cash rate from 3.6% to 3.85%. This development has implications for the outlook across multiple sectors of the economy, including manufacturing. In the RBA’s Statement of Monetary Policy released in November 2025 – when inflation for December was forecast at 3.3% – GDP growth was expected to increase around 2% before moderating in 2026 and recovering slightly in 2027.
However, the higher-than-expected inflation outcome, exceeding projections by around 0.5 percentage points, has led to a reassessment of the economic outlook. The February 2026 Statement of Monetary Policy shows a significant revision to GDP growth projections. Strong spending from both private households and the Government is now expected to support slightly higher short-term growth, with GDP projected to rise from 2.0% to around 2.3% by December (with official data to be released by the ABS in early March).
In the medium term, however, growth is forecast to slow, easing to approximately 1.8% by December 2026 and 1.6% by December 2027 (Figure 1).
Figure 1: GDP Growth Actual and Forecast
Sources: ABS, RBA, FWPA analysis
These projections are consistent with the revised inflation outlook, which indicates CPI will remain elevated until mid-2026 before gradually easing back into the RBA’s 2–3% target range (Figure 2).
Figure 2: CPI Actual and Forecast
Sources: ABS, RBA, FWPA analysis
Table 1: Summary outlook from the RBA Statement of Monetary Policy
The updated RBA outlook has flow-on effects for several industries, including timber manufacturing. FWPA analysis suggests that, in the medium term, the impact on total softwood sales volumes is likely to be modest (Figure 3). Continued demand from housing construction and ongoing government incentives are expected to support softwood consumption. However, tighter monetary conditions and slower economic growth are likely to temper this demand, leading to a downward revision of projected sales volumes of 1–2%.
Figure 3: Softwood Sales Volume (12-month rolling) – Actual and Medium-Term Projection
Overall, market conditions remain highly dynamic. The trajectory of softwood demand over the next 12 months will depend on several interacting factors, including inflation trends, monetary policy responses, housing market activity, and any further policy interventions to moderate price pressures. While underlying demand drivers remain relatively strong, the balance between inflation control and economic growth will be critical in shaping industry outcomes in the near- to medium-term.
