Will Australia Go Into Recession In 2024?

Ever since interest rates started rising, the big risk in the Australian economy has been that the RBA accidentally crushes our economy, sending us into recession. Could that still happen?

Inflation has fallen sharply—the latest annual figure for CPI came in at 4.1%—which is welcome, but would not happen in an environment of frothy growth. The rapid fall in inflation can be seen in the next chart. We didn’t expect to be this low so soon. Could it be a sign that the RBA has pushed too hard? Could they be strangling the life out of the economy?

What is especially important when looking at the most recent inflation data is to understand that both services and non-tradeable inflation fell. The fall in prices is not just a result of Chinese trinkets we imported for Christmas but represents a real cooling at the beating heart of the Aussie economy.

This is exactly what the RBA is seeking by hiking rates from .1% to 4.35%. Rising mortgage repayments leaves a lot less for groceries, home repairs, petrol, going out for dinner, etc. And that’s the point. The RBA is raising the cash rate to pull money out of circulation—if people aren’t spending at the shops it is harder for business owners to raise prices. This is how they combat inflation, but when they do so, they risk sending the economy backwards.

To know more : https://www.forbes.com/advisor/au/personal-finance/will-australia-go-into-recession/