(12 June 2023 – Australia) CBA and HSBC economists have lifted their projected risk of a recession to 50 percent in line with slashing economic growth forecasts following the RBA’s latest cash rate increase to 4.1 percent this month.
CBA now predicts the Australian economy will almost stagnate by Q4 2023, forecasting an annual expansion of a mere 0.7 percent in Q4 2023 after previously forecasting 0.9 percent growth at an equivalent RBA cash rate of 3.85 percent.
Debt capital markets markets have also flashed red on the chance of a recession, with the yield curve inverting for the first time since 2008 as the gap between the two-year and ten-year bond rate turned negative this week.
GDP expanded by only 0.2 percent in Q1 2023 the Australian Bureau of Statistics (ABS) reported this week, falling below economists’ expectations of 0.3 percent growth. The annual rate fell to 2.3 percent from 2.7 percent in Q4 2022.
“Many people will feel like it’s a recession with per person GDP tipped to go backwards for the rest of this year. Broadly flat real household consumption over the remainder of 2023 sits at the heart of our forecasts for the economy to grow significantly below trend and be in a per-capita recession for the remainder of this year” stated CBA Head of Australian Economics, Gareth Aird.
“We put the odds of a recession in 2023 at 50 percent as the lagged impact of the RBA’s rate increases continues to drain the cash flow of households that carry debt” Mr Aird added.
“RBA Governor Philip Lowe’s hopes for a soft landing will be challenging to achieve. The narrow pathway has become very narrow indeed. It also means that the economy is likely to slow more than we had previously thought and that the risk of a recession is now high at 50:50, in our view” commented HSBC Chief Economist, Paul Bloxham.