A bit of space can be a good thing sometimes. As an island continent, Australia has that in abundance. Our geographic separation and stable political and economic systems have allowed us to remain largely unscathed from every financial downturn in recent memory. With international tensions continuing to unfold, we can be thankful for these lucky circumstances and our place on the island.
Gazing forward, the economic outlook presents both challenges and opportunities for dental professionals. Understanding these dynamics is crucial for strategic planning and sustained growth in the dental sector.
Global Outlook
Most institutions have downgraded global GDP forecasts. Perhaps most bearishly, the IMF previously downgraded world economic growth to 1.7%, down from its previous forecast of 3.2%. Still, even this more pessimistic view has been revised up to 2.8%, since the shock and awe of tariff flip flops have worn off.
Despite the recent shake up of the status quo, the world’s economic outlook remains (relatively)stable. While the possibility for isolated recessions exists, these remain unlikely and minor.
Local Outlook
The Government is still forecasting the Australian economy to grow by 2.25% in the 2025–26financial year. The expected growth is underpinned by a recovery in consumers pending and a rebound in key sectors. For dental practices, this suggests a potential uptick in patient demand, particularly for elective procedures.
Less optimistic analysts have reduced their growth expectations to 1.6%. This is largely based on the downside risks posed by the new US tariffs and escalating trade tensions between the US and China.
US Tariffs
No discussion of current economics would be complete without at least mentioning the T word. Most economists expect the direct impact of the new 10% tariff to have a negligible impact on Australian exports to the USA. While this is good news, the longer-term flow-on effects to global trade remain less clear.
The USA accounts for just over a quarter of global GDP. So, the extent and severity of a downturn there can have wider implications for the world economy. Thankfully analysts are predicting continued, albeit somewhat constrained economic growth. Even in the USA, where the Tariffs will have the greatest impact, the risk of recession is muted(25-37%).
The biggest single risk to Australia will be the impact this has on China, our single most important export market. The IMF previously predicted the tariffs to dampen China’s growth rate by about 2%. This still means the “miracle economy” is predicted to grow by 4% in calendar year 2025.
The latest 90-day cease fire in the trade dispute is a very positive development. It indicates that both key players have no interest in unchecked escalation that leaves everyone worse off. Additionally, the CCP has already adjusted their policies to protect their domestic economy. Based on their performance in response to previous tariffs, we can expect them to be able to either absorb or mitigate the majority of any actual impact on their exports as well.
Inflation and Employment Trends
Inflation rates are expected to stabilize within the Reserve Bank's target range of 2–3%by mid-2025. Coupled with continued low unemployment rates and real wage growth, this environment should foster strong consumer confidence. Dental practices may experience increased patient willingness to invest incomprehensive oral care.
Interest Rate Decreases
Looking to the consensus of financial markets, we can expect more interest rate relief sooner rather than later. Based on ASX 30 Day Interbank Cash Rate Futures, a rate cut of 25 basis points is quite likely in May 2025. 2-3 further rate cuts in the first half of FY26have been priced into the futures market. This would put the cash rate at or around 3% by the end of the 2025 calendar year.
While this is just one predictive measure, the big 4 banks are in close agreement with this. Should this play out while employment remains strong, we can expect very favourable trading conditions for dental businesses.
Cost of living Relief
The centrepieces are adjustments to the Medicare Levy thresholds and additional tax relief for lower income earners. In theory these measures should help to sure up purchasing power for patients in greater need of dental care. Realistically, these policies will do little other than to minimise bracket creep for those earning less than average incomes.
Implications for Dental Practices
Despite the uncertainty and potential downside risks, both the local and global economies are looking resilient. In this evolving economic context, dental professionals should consider how to capture their maximum growth potential:
Invest in Technology: Adopting digital workflows can enhance efficiency and patient experience.
Expand Service Offerings: Introducing advanced treatments, such as full arch implant solutions, can meet growing patient expectations.
Financial Planning: Utilizing incentives like the instant asset write-off can optimize capital investments.
MoreDent provides comprehensive solutions to support these strategic initiatives, ensuring dental practices are well-equipped to thrive in the current economic climate. Reach out to discuss how we can help you Scale in FY26 and beyond.
