The top four firm noted Australia’s current economic growth is “looking good” based on help from a surge in resource exports as well as low interest rates, which has meant an increase in homebuilding and retail turnover.
However, Deloitte indicated Australia is “not out of the woods yet”, with the decline in mining construction set to accelerate.
In addition, the government’s proposed Budget has decreased consumer confidence, which Deloitte said will hinder economic growth.
Deloitte explained there are also reasons to expect an increase in the Australian cash rate from its record lows in late 2014.
“Growth is back above trend, housing prices have surged, and big banks have taken advantage of super cheap borrowing costs globally to edge up their mortgage rate discounts,” said Deloitte.
“The latest growth figures were artificially strong, consumer sentiment is soggy, 2013’s surge in inflation has since moderated, and while the iron ore price is down, the Australian dollar is up,” Deloitte added.
The firm also said that in the last decade, federal spending has increased by 3 per cent per year more than inflation.
“Unless policy changed, the next decade was headed for annual real growth of 3.5 per cent – and deficits as far as the eye can see,” Deloitte said.