Major economic shocks are now expected every one to two years, CommBank's chief economist warns
Australia has entered a structurally different economic era in which global shocks are occurring far more often than in previous decades, according to Commonwealth Bank's chief economist.
Luke Yeaman identified four major forces reshaping the economic environment: shifting geopolitical competition, the rise of artificial intelligence, the transition to net zero, and rapidly changing demographics. He argued it is the combined weight of these forces — not any single one — that is driving greater instability across markets and households.
"Uncertainty and volatility is the new normal," Yeaman said. "I have argued strongly that we are now in a fundamentally new and different economic era. One that is more dangerous and more complex."
On geopolitics, Yeaman pointed to strategic competition between the United States and China as a key driver of supply chain risk and a reversal of globalisation. On technology, he said the effects of AI would likely surpass those of the dot-com era, with the largest impacts still to come.
The net zero transition, he added, is already driving volatility in energy markets and will require rapid adaptation across aviation, agriculture, construction and other sectors. Meanwhile, ageing populations and falling birth rates across advanced economies — including a shrinking population in China — are adding further complexity.
The cumulative effect, Yeaman said, means major economic shocks should now be expected every one to two years, rather than once a decade. This increased frequency is also pushing up long-term neutral interest rates as competition for capital intensifies across defence, AI and renewable energy investment.
Supply chain risks
The recent disruption to the Strait of Hormuz featured prominently in Yeaman's remarks. He described the episode as an illustration of how trade chokepoints can be swiftly exploited, with significant downstream consequences for a trade-dependent economy such as Australia's.
CommBank's central scenario is that a diplomatic resolution will reopen the Strait within four to six weeks, averting critical shortfalls in oil and other commodities. However, Yeaman cautioned that if the closure extends to eight to 10 weeks, oil prices could reach US$150 a barrel, with broader commodity shortages to follow. He described this as the single largest near-term risk to the Australian economy.
Household spending slowing
Turning to domestic conditions, Yeaman said CommBank's internal data shows economic activity is decelerating, led by weaker household spending and softening house prices.
Household income growth, which was running above 10% annually in 2025, has since eased to 7–8%. Spending growth has slowed from around 6% last year to below 5%, and fewer funds are flowing into redraw and offset accounts — a sign that households are drawing on savings buffers built up during the post-COVID period.
Employment growth is also tracking below the level needed to keep the unemployment rate stable, suggesting the jobless rate will drift higher in coming months.
Despite the slowdown, Yeaman said CommBank does not see a recession as a likely outcome. He forecast overall economic growth to fall from around 2.5% to 1.5% by year-end — a marked deceleration, but still positive. Public spending, defence investment, and the data centre and renewables construction boom are all expected to provide support.
Consumer behaviour under pressure
On household spending patterns during downturns, Yeaman noted consistent patterns in CommBank data. When incomes come under pressure, households first draw on savings, then pull back on discretionary categories such as furnishings, recreation, and clothing, while protecting essential outlays including mortgage and rent payments, utilities and health care.
Food spending holds up well overall as an essential category, but within it, Yeaman observed a clear rotation away from premium products and restaurant dining toward value options and smaller basket sizes.
The household saving rate, which had dipped to around 2% during the post-COVID cost-of-living crunch — well below the typical 5–7% range — has since recovered to more normal levels.
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