‘Per-capita recession’ tipped as Australia’s big banks downgrade growth forecasts amid interest rate rises


In accordance with Treasury evaluation, 465,000 jobs had been created between Could 2022 and Could 2023, the strongest employment progress of main superior economies.

Treasurer Jim Chalmers mentioned the figures had been a exceptional achievement given the financial uncertainty forward.

Treasurer Jim Chalmers says the strong jobs market will help Australia weather tough economic conditions.

Treasurer Jim Chalmers says the sturdy jobs market will assist Australia climate powerful financial circumstances.Credit score: Louise Kennerley

“Extra Australians are in work than ever earlier than, the participation price is larger than ever earlier than and the share of ladies in work is larger than ever earlier than,” he mentioned.

“Whereas we all know slowing world progress, excessive inflation and better rates of interest will impression our economic system and labour market over the approaching 12 months, Australia is in a greater place than almost some other nation to face the challenges forward.”


The federal government has been beneath political stress to deal with the worsening financial outlook. The Greens have repeatedly urged the treasurer to overrule the RBA’s price rise selections, whereas the Coalition says the federal government wants to spice up productiveness.

Shadow treasurer Angus Taylor mentioned Australia got here out of the pandemic in a robust financial place however beneath the Labor authorities that basis was weakening.

“Labor’s plan is failing to combat inflation, failing on productiveness and failing on financial progress. Labor’s solely plan is to make Australians poorer,” he mentioned.

The unemployment price fell 0.1 proportion factors to three.6 per cent in Could after a further 76,000 individuals gained work that month, giving the RBA extra cause to proceed elevating rates of interest. ANZ economists have downgraded their forecast for financial progress in consequence.

ANZ expects the RBA to carry the money price by 0.25 proportion factors in each July and August, taking it to a near-12-year excessive, given the surprisingly sturdy employment figures.

“We anticipate GDP to develop simply 1 per cent in 2023 and 1.3 per cent in 2024, with per-capita GDP prone to decline till the second half of 2024,” it mentioned.

Westpac expects the unemployment price to rise to the pre-pandemic stage of 5.3 per cent by the tip of subsequent 12 months. Evans mentioned the brand new forecasts may imply a recession, relying on the definition.

“A rise within the unemployment price from 3.5 per cent in the beginning of 2023 to five.3 per cent on the finish of 2024 would possibly match an alternate definition of a recession, though we’re unaware of any formal definition,” he mentioned.

“Our forecasts additionally indicate per-capita spending and GDP recessions in 2023 and 2024, which is usually used as an alternative-measure definition of recession.”


Commonwealth Financial institution head of Australian economics Gareth Aird mentioned whereas Could’s labour pressure information was “unquestionably sturdy”, there have been indicators inside the figures that the roles market is cooling, with a 0.3-percentage-point enhance in underemployment to six.4 per cent, its highest stage since February final 12 months.

“The message we take from the information is the labour market is loosening. However not through the normal mechanism of a rise within the unemployment price. Quite, it’s loosening through extra staff on the lookout for further hours,” he mentioned.

Aird additionally famous that solely about half of the RBA’s 4 proportion factors of rate of interest rises had hit households, that means there was a lot extra to nonetheless be felt. “However the [RBA] board would possibly really feel the coverage response of least remorse at this stage is to drag the speed hike set off once more in July,” he mentioned.

Reduce via the noise of federal politics with information, views and knowledgeable evaluation from Jacqueline Maley. Subscribers can signal as much as our weekly Inside Politics publication right here.

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