Earlier views suggested that Australia would avoid a recession in the current cycle.
The Reserve Bank of Australia sees falling house prices as a “headwind” for consumer spending and has forecast that the growth in household consumption will halve over 2023.
The forecast is included in the central bank’s updated Statement on Monetary Policy released on Friday, which forecasts that household consumption will grow by 4.9% to December 2022, while growth to December 2023 will fall to 2.4%, (See: MNI STATE OF PLAY: Household Spending A Factor For RBA Hikes).
Previous forecasts, in May, had consumption growing by 5.8% this year and 3.1% in 2023, (See: MNI BRIEF: RBA Sees Inflation Back To Target By End 2024).
The slowdown in spending, driven in part by the RBA’s interest rate hikes, will also dampen overall growth with the Australian economy now forecast to grow by 3.2% this year, down from the previous forecast of 3.6%. The RBA now sees growth at 1.8% by the end of 2023, from the previous estimate of 2.0%, (See: MNI INSIGHT: RBA Confident Of Avoiding Recession As Econ Cools).