Lowe had signalled his comfort with a mid-2025 timeline to get inflation back into the 2-3 % target range so as to preserve job gains, but this week said that patience had a limit.
#Bumpy road sign images full#
With the full effect of the hefty monetary policy tightening - 400 basis points since last May, including 100 basis points since February - yet to be felt through the economy, bond markets are starting to price in recession risks. Growth is already slowing to sub-par levels, with data this week showing the economy grew just 0.2% in the March quarter as struggling households ran down savings and cut back on spending. Further, Bloxham expects the RBA to start cutting rates in the second quarter of 2024.Ĭommonwealth Bank of Australia on Friday puts the odds of a recession this year at 50%, predicting growth to slow to an annual rate of 0.7% in the last quarter and jobless rate picking up to 4.7% in mid-2024. He expects quarterly growth to average just a 0.1% over the next four quarters, with a 50% chance that the economy would enter a recession. with a high risk of outright recession," said Paul Bloxham, HSBC's chief economist for Australia, New Zealand and Global Commodities. "Combined with the hikes already delivered, we see this as likely stalling the economy. The shift led economists, some who thought rates had peaked at 3.6% when the RBA paused its tightening cycle in April, to factor in at least one more rate rise and a genuine risk of a recession, the nation's first in more three decades outside the sharp downturn at the start of the COVID pandemic in 2020.
For a year, Reserve Bank of Australia Governor Philip Lowe has been talking of successfully navigating a narrow path to lower inflation while keeping unemployment near 50-year lows.īut this week the governor's tone changed.Īfter a surprise rate rise to 4.10% and a hawkish promise of even more to come, Lowe warned the narrow path would also be bumpy and that getting high inflation down would take priority over preserving jobs.
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