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  • Writer's pictureCrest Economics

Australia avoided recession in 2023. What about for 2024?- Dec 2023

Fortunately Australia dodged its fears of entering a technical recession during 2023 thanks to a migration surge, with more than half a million people moving to the nation during the year. The nation’s unemployment rate also remained virtually unchanged near 50 year lows. For many, life in 2023 felt recession-like as the population faced cost-of-living pressures with interest rate hikes and rising tax bills burdening households. However, economists are remaining hopeful for the upcoming year.

In 2023, the Reserve Bank lifted the cash rate five times from 3.1 per cent to 4.35 per cent by the end of the year. Despite the rate pause in December, economists remain cautious and warn that the RBA is is hawkish and will undertake another final final rate hike. However, with December GDP data coming in at much lower than expected, 0.2 per cent growth in the three months to September, the economy can remain hopeful in long term rate cuts next year.

With Australia’s December quarter 2022 inflation rate coming in at 7.8 per cent, price stability was also a key economic issue for 2023. Although inflation has recovered to 4.9 per cent for the year to October, it is still roughly double the RBA’s target of between 2-3 per cent. Much of this recovery was thanks to solving supply-related disruptions associated with the pandemic and and Russia-Ukraine tensions. However, a slow grind to achieving price stability remains due to services inflation.

Australia was also lucky enough to be cushioned by the surge in migration into Australia. The half a million people who migrated into Australia provided the economy with the base level of growth, as it translated into consumer spending and growth in home prices. Economists have mentioned that this surge prevented the nation from entering a technical recession. However, this will not continue into 2024 as net migration is forecasted to fall to 375,000, dampening Australia’s population growth. Nevertheless, the housing market is expected to be resilient as economists expect house prices to increase overall, but at a much slower pace.

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