Australia: According to Deutsche Bank, Australia is likely to face a recession in 2023. To make this forecast, the bank did not adhere to the generally accepted concept of “technical recession.” Traditional definitions of a recession include two consecutive quarters of negative economic growth (GDP).
Deutsche Bank instead focused on the direction it thinks the unemployment rate will go. As the economy sputters, it anticipates a rise in Australia’s unemployment rate the following year.
“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,” Deutsche Bank chief economist Mr. Phil O’Donoghoe stated.
“If our forecast is realised, that would qualify as a recession on our definition, even if — as our forecasts assume – gross domestic product (GDP) avoids two consecutive quarters of negative growth,” the economist further added.
Dr. Leonora Risse, a labour economist, disagreed with the statement. She doesn’t believe it is reasonable to gauge an economic recession by pointing to a significant increase in the unemployment rate.
A recession means going backwards, So economists think of recessions as the economy slowing down so much that economic activity is actually declining, and total economic activity is less than it was in the previous quarter. 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.
Dr. Risse remarked.
How shoppers or consumers respond to the already announced interest rate increases by the Reserve Bank could drive unemployment higher. In a speech earlier this month, Reserve Bank deputy governor Mr. Michele Bullock made an observation that, “Consumer spending has been supported by past gains in incomes, asset prices and accumulated savings during the pandemic.”
Mr. Bullock also mentioned that high inflation, rising interest rates, and declining home prices, however, are somewhat eroding these sources of support, and this is anticipated to impede consumption growth beginning in the first quarter of 2019.
One economic growth factor that has been missing in recent years is strong wage growth. The government is currently working to get the Senate to enact its labour-management relations measure. A proposal to increase access to multi-employer bargaining, a type of enterprise bargaining in which workers from a single industry band together to seek higher compensation, is included in the bill.
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