At a recent Moir Group economic briefing, HSBC Chief Economist for Australia and New Zealand, Paul Bloxham, shared his outlook on the global and Australian economies, highlighting the forces driving growth, the risks business leaders should monitor, and why productivity remains Australia’s most significant economic challenge.
Introduced by Moir Group’s Andrew Pownall, the session provided valuable insights for finance leaders, executives and business decision-makers navigating an increasingly complex economic environment.
A Global Economy Defying Expectations
Despite ongoing geopolitical tensions, trade disputes and prolonged international conflicts, the global economy has demonstrated remarkable resilience.
While many anticipated slower growth following trade policy disruptions and instability across several regions, major economies have continued to expand, global trade volumes remain strong, and financial markets have generally remained buoyant.
According to Bloxham, three key factors explain this resilience:
1.Trade Disruptions Have Had Less Impact Than Expected
Although global trade tensions have dominated headlines in recent years, economies have proven highly adaptable. Supply chains have adjusted, alternative trade routes have emerged, and businesses have demonstrated a strong capacity to respond to changing market conditions.
China, in particular, has successfully redirected exports to new markets, helping sustain growth despite trade tensions with the United States.
2. Geopolitical Shocks Have Been Absorbed
While conflicts in the Middle East and Ukraine continue to create uncertainty, high levels of commodity inventories and strategic energy reserves have helped soften the economic impact.
Although energy prices remain an important watchpoint, the severe supply shortages and inflationary shocks many analysts feared have not materialised to the extent anticipated.
3.AI Is Becoming a Major Economic Growth Driver
Perhaps the most significant theme discussed was the rapid rise of artificial intelligence.
Bloxham emphasised that AI is no longer simply a technology trend. It has become a major investment cycle, driving substantial spending on data centres, semiconductors, power infrastructure and digital transformation initiatives.
The result is a wave of investment supporting growth across the United States, Asia and other global markets, while creating opportunities for organisations to enhance productivity and improve operational efficiency.
Australia’s Challenge: Productivity, Not Demand
While the global economy continues to perform relatively well, Australia faces a different challenge.
According to Bloxham, Australia’s primary economic issue is a prolonged period of weak productivity growth.
Productivity measures how efficiently businesses and workers convert labour and resources into economic output. When productivity slows, the economy’s capacity to grow also slows.
As a result, inflationary pressures emerge more easily, forcing the Reserve Bank of Australia to rely on higher interest rates to reduce demand and bring inflation under control.
“The economy’s supply side is weak because productivity growth has been exceptionally weak,” Bloxham explained.
Without meaningful productivity improvements, Australia’s economic growth potential remains constrained, limiting improvements in living standards and increasing pressure on businesses to operate more efficiently.
Major Insights and Key Takeaways
- Productivity Is Australia’s Defining Economic Challenge
Weak productivity is limiting economic growth, contributing to inflationary pressures and reducing Australia’s ability to improve living standards over the long term.
Without productivity-enhancing reforms, businesses should expect a more challenging operating environment and slower economic growth.
- AI Is Creating Both Opportunity and Risk
AI-driven investment is currently a major contributor to global growth. However, organisations should remain realistic about the pace and timing of productivity gains.
History suggests transformative technologies often generate significant optimism before their benefits are fully realised.
Businesses that focus on practical AI adoption and measurable efficiency improvements are likely to outperform those pursuing technology purely for hype.
- Higher Interest Rates May Persist for Longer
Global demand for capital is increasing as governments and businesses invest heavily in AI infrastructure, energy transition projects and defence initiatives.
This environment may result in interest rates remaining higher than many businesses had previously anticipated, reinforcing the importance of careful financial planning and capital allocation.
- Economic Conditions Will Require Greater Operational Discipline
With growth expected to soften and cost pressures remaining elevated, organisations will need to place greater emphasis on efficiency, workforce productivity and strategic investment decisions.
Practical Implications for Business Leaders
For finance and business leaders, the discussion highlighted several priorities for the next 12 to 24 months:
Focus on Productivity Improvements
Review business processes, systems and organisational structures to identify opportunities for greater efficiency. Incremental productivity gains across teams and functions can create significant competitive advantages.
Accelerate Thoughtful AI Adoption
Rather than chasing every new technology trend, focus on AI initiatives that deliver measurable outcomes, including:
- Process automation
- Financial reporting efficiencies
- Forecasting and analytics improvements
- Workflow optimisation
- Knowledge management and decision support
Monitor Cost Structures Closely
As economic growth slows, businesses should continue assessing fixed and variable costs, ensuring resources are aligned to strategic priorities and growth opportunities.
Preserve Workforce Capability
Although some organisations may face pressure to reduce costs, retaining critical talent and leadership capability remains essential. Businesses that maintain organisational strength are often better positioned to capitalise when conditions improve.
Plan for Continued Economic Uncertainty
Scenario planning, cash flow discipline and strategic flexibility will remain important as organisations navigate changing market conditions.
Further Reading and Resources
For leaders interested in exploring these themes further, the following resources provide valuable insights:
- Gamechangers: The next stage of AI’s impact on the economy – https://www.business.hsbc.com/en-gb/insights/gamechangers-the-next-stage
- The state of AI in 2026: On the road to ROI McKinsey – https://www.mckinsey.com/capabilities/quantumblack/our-insights/the-state-of-ai
Looking Ahead
While the global economy has shown surprising resilience, the message for Australian businesses was clear: productivity will be the defining challenge and opportunity of the years ahead.
Whether through technology adoption, operational improvements, workforce capability or strategic investment, organisations that focus on doing more with existing resources will be best positioned to navigate economic uncertainty and create sustainable growth.
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