Economists fear that the Australian economy is looking more vulnerable amid growing bets that the RBA will lift rates above 4 per cent.
The probability that the Australian economy tips into recession has jumped, economists warn, as evidence of stubborn inflation and resilient consumer spending supports bets that the Reserve Bank will need to raise the cash rate above 4 per cent.Alex Ellinghausen
“There’s always a fine line where you won’t quite know the tipping point, but I’ve long thought that rates at 4 per cent or above would push Australia into recession,” Dr Oliver said. “It is delicately poised though, and is worsened by the nature of the lag effects [from rate rises] this time around.”
Inflation “is forcing the RBA to keep hiking rates, despite the volume of activity that is clearly slowing, and set to weaken further ahead,” said UBS’ chief economist for Australia, George Tharenou.“This is why we think the risk of recession is increasing materially to a 25 per cent probability.”when it predicted the cash rate will peak at just 3.1 per cent which would prevent Australia from entering a downturn.
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