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Key economic lessons and insights from 2024
As 2024 draws to a close, the chief investment officer for the Commonwealth Bank reflects on an economic year that has been a tale of financial pressures and remarkable resilience.
Grace Robbie
Speaking on a recent episode of The Lawyers Weekly Show, Jason Todd, the chief investment officer for Commonwealth Bank’s private bank, shared valuable insights into the challenges and takeaways from an economically turbulent year, emphasising the hardships and cautious optimism for the year ahead.
Todd acknowledged that 2024 has been an economically challenging year for everyday Australians, mainly due to the ongoing repercussions of the COVID-19 pandemic continuing to exert pressures on the global economy.
“From an economic perspective on Main Street, it’s been a tough period, and that’s expected. We had gone through the COVID shock [and when] we came out of that, interest rates had to rise very quickly.
“The traditional sort of plain vanilla implication of rising interest rates is that they go up to bring inflation down, to slow economies down. You have had [an] economic slowdown,” he said.
Despite indicators of economic stability throughout the year, Todd noted that the reality on Main Street has been much more complex, with many individuals continuing to face substantial, tangible economic challenges.
“On Main Street, it’s actually been a very difficult time for a lot of people, and that is, in my profession, has been a little bit clouded by the fact that equity markets and financial assets have performed incredibly well during this period,” he said.
Todd expressed that one of the striking observations from 2024 has been the disparity between financial markets and everyday economic experiences.
“There’s been a real dichotomy between sort of the average person and how they’re feeling and what the financial markets have been doing,” he said.
Despite these challenges, Todd conveyed optimism for what 2025 holds, highlighting that while inflation remains elevated, he believes growth has reached a critical juncture and is positioned to improve moving forward.
“I’m quite optimistic. Optimistic as we go into 2025 relative to where we’ve been in 2024, inflation has still been very high in Australia. Interest rates are at peak levels. Growth has, we believe, sort of fallen to levels that should begin to improve from here.
“We do think that you’ve seen the worst of what you are likely to see in this economic cycle in terms of those implications or those effects that we talked about,” he said.
“On the plus side, you can look towards 2025 and say that we think economically things are bottoming out.”
However, Todd acknowledged that while improvements in interest rates and income growth are anticipated, they will unfold gradually and remain modest in scale.
“But on the negative side, I would say that the trajectory towards an improvement in 2025 is still likely to be quite modest.
“The improvement that the average person will see, from an economic perspective, in terms of interest rate support, in terms of income growth, and those types of things, it’s still going to be quite modest,” he said.
Todd highlighted that despite these challenges, a key takeaway from 2024 is the resilience exhibited by the Australian economy during this demanding period, characterised by high inflation and the ongoing adjustments following the pandemic.
“But you could also stand, we went through a global pandemic, an incredibly negative development, and we also went through an increase in inflation, something that we haven’t seen for nearly 30 years,” he said.
“To have come out of it with so little collateral damage in terms of the real economy, it’s actually quite an outstanding achievement. And I would say that a lot of central banks, including the RBA, have done quite a good job of being able to actually navigate economies through that adjustment. It’s a very difficult environment that you’ve been in.”
