If the economy grows as slowly as the IMF predicts it will for the next 2 years, Australia will be lucky to avoid a recession.
The IMF’s latest World Economic Outlook is mostly framed around trying to thread the needle of reducing inflation and cost of living rises and not crashing the economy while doing so.
And while overall the IMF suggests the world economy is in for a “soft landing” the picture it paints for Australia is of a tough year ahead. Policy director Greg Jericho notes in his Guardian Australia column that the IMF has downgraded its expectation for growth next year from an already bad 1.7% to a historically awful 1.2%.
Were Australia’s economy to grow this slowly through the year and avoid a recession it would be the first time that has happened. The IMF also predicts that 2025 will grow by just 2.0%. Were that to occur, it would be the first time on record that Australia’s economy has gone 3 consecutive calendar years without growth above 2%. That is hardly a “soft landing”
The IMF also now predict unemployment will rise quicker than it expected would be the case in its previous outlook in April.
The report highlights the need for the government and the Reserve Bank to work to deliver full employment. The current settings have the nation on course to grow so slowly for so long that the risk of the economy stalling are rising precipitously.
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Home loans have fallen sharply in the past year, and the rate rises are clearly having a major impact. As such the Reserve Bank needs to wait before raising them again.
The cost of mortgages is soaring and households are spending less in the shops – the Reserve Bank should hold off on raising rates again next week
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