‘Sharper, longer slowdown’ predicted for economy as fifth interest rate hike looms
Summary
Economists at CBA and NAB have cut their outlook for Australia, citing persistent inflation, higher oil prices and a weakening property market. The Reserve Bank of Australia is widely expected to raise interest rates on Tuesday, which could further slow growth and increase unemployment and recession risks.Key Facts
- CBA forecasts real GDP growth of 1% by the middle of next year, down from its previous estimate of 1.8%.
- CBA projects growth of 1.1% through 2027.
- NAB forecasts unemployment could rise from 4.7% to as high as 5.4% by the end of next year; CBA expects it to peak at 5.1%.
- Brent crude rose from about US$72 a barrel in early July to above US$110 in recent days, as the Middle East conflict broadened.
- AMP chief economist Shane Oliver said home prices could fall by as much as 15% before levelling off late next year; Sydney prices were already down 10% from their recent peak.
- Oliver said the chance of recession could reach 45% if the RBA raises rates as expected on Tuesday.
- A weaker housing market could reduce household spending and homebuilding, adding to economic pressures.
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