Australia (Commonwealth)_This is the latest financial forecast for the year ahead. According to a recent survey conducted by The Conversation, a group of 27 leading economists have weighed in on various aspects of the economy. The good news is that all of them expect inflation to continue its downward trend, although there is some debate about the speed of this decline. It’s important to note that the current inflation rate stands at 7 percent, down from its peak at 7.8 percent in the previous year. The economists also anticipate two more interest rate hikes by the Reserve Bank, with a projected peak of 4.7 percent in November.
However, there are concerns about the potential consequences of these rate hikes on an already weakened economy. In fact, twelve out of the 27 economists believe that a recession is either more likely than not or an even chance. Furthermore, they anticipate a “per-capita recession” where economic growth fails to keep up with population growth, resulting in a decline in living standards.
Despite these challenges, there are some positive expectations. Inflation is predicted to slide further to 5.2 percent by year-end, gradually reaching the Reserve Bank’s target band of 2-3 percent in the coming years. This decline, though slower than anticipated by the bank and the Treasury, is expected to pave the way for a small increase in real wages, marking the first growth in three years.
On the downside, the panel foresees weak economic growth, both globally and domestically. The US is expected to see growth of just 1.2 percent, while China, a major customer for Australian minerals, is projected to experience historically weak growth of 4.9 percent. As a result, Australia’s economic growth is forecasted to be just 1.2 percent for 2023, the lowest rate in over 30 years outside of a recession.
Unemployment rates are expected to gradually increase from the current near-50-year low of 3.6 percent, but it’s unlikely that Australia will return to pre-COVID levels. Additionally, household spending is predicted to grow by a modest 1.5 percent, leading to a decrease in the amount bought per household. However, there is still a forecast for continued modest growth in home prices, particularly in Sydney and Melbourne.
Overall, the panel anticipates a small budget deficit and modest growth in the share market. These predictions are influenced by factors such as the iron ore price and home and minerals prices.
Remember, these forecasts are based on expert opinions and economic modeling. While there are concerns about the potential impact of rate hikes and a possible recession, there are also opportunities for improvement in inflation, real wages, and housing markets. The economy is a complex system, and various factors can influence its trajectory.
