Is Australia careening towards recession? The RBA just gave its take
Updated . First published at
The Reserve Bank of Australia (RBA) has poured cold water on fears of a recession, saying the economy is expected to continue growing even if oil prices skyrocket.
Governor Michele Bullock said her monetary policy board is weighing up high global and domestic inflation, worsened by the conflict in the Middle East, in their future interest rate decisions.
RBA Governor Michele Bullock says AUstralia is unlikely to fall into recession. Louise Kennerley
She said inflation remains persistent but noted the three consecutive hikes this year have already shown positive signs in the economy.
“We’ve already seen some signs that this tightening is starting to work, though it will take around one to two years for the full effects to fully flow through to the economy,” she told a Senate estimates hearing today.
With GDP growth slowing, joblessness and interest rates increasing, and inflation surging, fears of a recession – which occurs when the economy shrinks in two or more consecutive quarters – have increased.
An Oxford Economics report released in April warned Australia would suffer a sharp recession under a prolonged war in Iran, which would drive up oil prices and global inflation.
However, Bullock today said the economy will likely continue to grow modestly, even under the worst scenarios of a prolonged war in the Middle East and rising inflation.
“While these are challenging conditions, the economy is still expected to grow even though modestly, even under these scenarios where oil prices are significantly higher than recent levels,” she said.
“Investment has been a bright spot recently, and growth is expected to continue in sectors of the economy with strong structural tailwinds, such as software, data centres and renewable energy.”
Bullock’s comments have effectively rebuked concerns that Australia is facing a recession, despite earlier this year warning that the war in Iran posed a “global recession risk”.
“We don’t want to have a recession, but if it’s hard to get inflation down, then we’re going to have to deal with that, possibly,” she said in March.
Treasurer Jim Chalmers has previously conceded the war is holding the Australian economy “hostage” but denied suggestions of a recession.
Responding to yesterday’s economic growth results, he said Australia has recorded faster annual growth than other advanced economies like the United Kingdom, Canada, Germany and Japan.
“Our economy has got no shortage of challenges, but it’s also got some very sturdy foundations,” he said.
“It shows how resilient our economy is at a time of very substantial global economic volatility and instability.”
Share a tip-off, video or photo with us
