Investment firm Deutsche Bank has forecast that Australia will enter a recession in 2023.
The bank claims that it has not worked with the traditionally accepted definition of “technical recession” to produce this gloomy forecast i.e. two consecutive quarters of negative economic growth (GDP).
The experts looked at the trajectory of Australia’s unemployment rate and forecast that as the local economy slows this rate will further spike higher next year.
Deutsche Bank chief economist Phil O’Donoghoe told ABC:
“We expect Australia’s unemployment rate to end 2023 at 4.5 per cent, that is, one percentage point higher than the current unemployment rate at 3.5 per cent.”
The Reserve bank of Australia (RBA) has put the unemployment rate forecast for the end of 2023 at 3.7 per cent.
Last month, Reserve Bank deputy governor Michele Bullock noted in a speech:
“Consumer spending has been supported by past gains in incomes, asset prices and accumulated savings during the pandemic. However, these sources of support are being eroded to some extent by high inflation, rising interest rates and falling housing prices, and this is expected to contribute to a slowing in consumption growth from early next year.”
Labour market experts disagree with this gloomy prediction as a large increase in the unemployment rate is not a reasonable way to measure an economic recession.
Dr Leonora Risse told the ABC:
“A recession means going backwards. … Technically we need to see two-quarters of consecutive negative growth in GDP for the economy to be officially classified as being in recession. It’s possible to see a rise in the unemployment rate, but for the economy not to have slowed down to the extent that it’s in a recession.”
The Australian Government is trying to pass its industrial relations bill through the Senate that will see wage growth. Part of this new bill is also a form of enterprise bargaining that will help employees from within an industry band together to negotiate higher pay.
The Australian Bureau of Statistics (ABS) will release its updated data on Australian income on Wednesday and the unemployment rate for October on Thursday.
