The prediction of a per-capita recession for Australia is a cause for concern for many, especially in an economy hit hard by rising interest rates.
Recent economic projections from the big four banks – NAB, ANZ, Commonwealth Bank, and Westpac – all indicate a downgrade of their yearly forecasts. Rates continue to rise, leading to an increasingly expensive environment for Aussie families, which in turn leads to a lesser return on investments and lower economic growth.
Bill Evans, chief economist of Westpac, informed Nine News that the bank had reduced its outlook for 2023 growth from 1% to a mere 0.6%.
“We anticipate that household consumption, the key factor behind this unimpressive growth projection, will grow by a mere 0.3 percent in 2023 and 0.6 percent in 2024. This line of consumption is concordant with the feeble consumer sentiment that has been in evidence since 2022, when inflation and interest rates leveled off at elevated levels,” Mr Evans said.
The prediction from Commonwealth Bank was more pessimistic, with GDP predicted to increase by only 0.7% by the end of 2023, resulting in a per-capita recession – when there is two consecutive quarters of negative growth in the country’s Gross Domestic Product.
The Economics team from Commbank has predicted the Reserve Bank of Australia will increase the cash rate by another 25 basis points in August, taking the peak rate to 4.35%.
Furthermore, there may also be an increase in July. The RBA has further forecasted that GDP will increase by 1.5% in the latter part of 2023, remaining unchanged in 2024, following the June 2021 cash rate hike to the highest level in 11 years at 4.1%.
