consumption was holding up. the labour market was tight, supporting household incomes. at the same time, inflation was at multi - decade highs and interest rates were rising. while this was impacting consumer confidence, we were yet to see much of an impact on consumer spending and business confidence was high. higher consumer prices, rising interest rates and falling housing prices were all expected to increasingly weigh on consumption. in this environment our forecasts were for growth to slow in 2023. in line with this we were forecasting the unemployment rate to gradually increase over the forecast period. inflation was forecast to peak at 7¾ per cent at the end of 2022 before gradually moving back to the top of the target band by the end of 2024. key developments since august there have been a number of developments that have led us to revise our forecasts since august, although the extent of revisions has been reasonably modest compared with the experience of recent years. on the international front, the prospects of a significant slowing in the global economy have intensified. this reflects a number of factors. inflation has stayed persistently high, which has resulted in an upward revision of the outlook for policy rates in a number of advanced economies. there has already been a fast and simultaneous rise in policy rates, and many central banks have indicated that they will do what it takes to get inflation back down to their targets. the energy crisis in europe has also led to a further downgrade of growth in the euro area and the united kingdom. expectations for growth in advanced economies are, therefore, a bit weaker than three months ago, and much weaker than was the case at this time last year ( graph 1 ). and finally the outlook for china has been downgraded. overall growth in australia ’ s trading partners is expected to be slightly below 3½ per cent in 2022 and 2023 – well below its pre - pandemic decade average of 4½ per cent. graph 1 gdp level forecasts * december 2021 = 100 index g7 major trading partner east asia * * nov 2021 smp current index * * * dashed lines represent forecasts. major east asian economies excluding japan. sources : abs ; ceic data ; consensus economics ; rba ; refinitiv turning to the domestic economy, the recent flooding in south eastern australia has been disastrous for many households and businesses. the murray - darling basin received a record volume of rain in october following wellabove - average rainfall earlier in the year ( graph 2 ). the full

are helping to moderate demand pressures. supplier delivery times have shortened, backlogs of work have declined and inventories have mostly recovered to more normal levels ( graph 6 ). along with lower oil prices, this has contributed to a decline in shipping costs and a moderation in input costs more generally. graph 6 supply indicators index delivery times pmi * inverted scale index shipping costs * * 2017 – 2019 average = 100 * * * purchasing managers ’ index. index of spot and contract container rates by route from china. sources : ihs markit ; rba ; refinitiv domestic price pressures are also playing a role in the current period of high inflation. the outlook for domestic energy prices and rents are two areas we are monitoring closely. the large increases in retail gas and electricity prices that are predicted for next year will directly add over 1 percentage point to headline inflation over the year to september 2023. because energy is an input to many of the goods and services we buy, there will also be second - round effects as businesses increase their prices in response. these effects are uncertain, but the secondround contribution of electricity prices to underlying inflation could be around ½ percentage point over 2024. rental price inflation has also picked up and is expected to increase further over coming quarters ( graph 7 ). rental vacancy rates have declined since the beginning of the year and are at historic lows in a number of cities. growth in advertised rents for new leases has been very strong as a result. this will continue to flow through to the cpi measure of rent inflation, which measures rent increases for all leases, over coming quarters. close to onethird of australian households rent and many of these households have relatively low income and wealth. higher rents could push some renters into financial stress, particularly when combined with broader cost - of - living pressures. r e s e r v e b a n k o f au s t r a l i a graph 7 rental market indicators % % cpi rents inflation % % rental vacancy rate inverted scale sources : abs ; rba ; reia growth and employment the australian economy appears to have grown solidly over the second half of 2022, as household spending on services remains firm alongside a further pick - up in education and travel services exports ( graph 8 ). gdp growth is then expected to slow in early 2023, as the recovery in household spending from pandemic - related restrictions is expected to have mostly run its course. consumer spending has been supported by past