Australia's Path Out of Recession: A Long Road Ahead
Australia's Path Out of Recession: A Long Road Ahead
1
The information on this website is general in nature and does not take into account your objectives, financial situation, or needs. Consider seeking personal advice from a licensed adviser before acting on any information.
Australia is currently navigating its way out of what has been called the longest recession on record.
The nation has seen six consecutive quarters of declining per capita gross domestic product, indicating a sustained period of economic downturn.
A significant contributor to this decline has been the household sector. By the second quarter of 2024, there was a notable 2.4% reduction in real per capita household consumption from its peak level.
Alarmingly, real per capita household disposable income experienced an even steeper drop, plunging by approximately 8%, as shown in national accounts data. This marks the largest recorded decrease in Australia’s history.
In its latest economic outlook, encapsulated in the Red Book for October, Westpac predicts a slow recovery process from this recession. They highlight the harsh fall in per capita disposable income, which their analysis pegs at a dramatic 10% drop.
According to Westpac, “The combined effect of rising income tax payments, higher interest and the surge in inflation has produced a 4.8% drop in aggregate terms since Sep 2021 and an eye-watering 10% plunge in per capita terms.”
Westpac draws a stark comparison to the early 1990s recession, stating, “That is about double the size of the decline seen during the recession in the early-1990s (when the average mortgage interest rate was 15% and the unemployment rate spiked 4ppts on its way to an eventual peak of over 11%).”
There is a slightly improving consumer mood, bolstered by tax cuts and other governmental aid, and an optimistic shift in expectations for interest rates. “The consumer mood has become considerably less bleak, buoyed on the one hand by the additional cash in hand as tax cuts and other support measures flow through, and on the other by turning expectations for interest rates.”
Commenting on consumer sentiment, Westpac notes, “The most striking sentiment shift over the last three months has again been around consumer expectations for interest rates. The Westpac-Melbourne Institute Mortgage Rate Expectations Index fell by a third between July and October.”
Despite these modest shifts in consumer sentiment, Westpac cautions that full economic recovery may proceed at a gradual pace. “The medium-term recovery process looks likely to be a slow one,” they warn.
Factors contributing to this sluggish recovery include a gentle easing cycle by the Reserve Bank of Australia, the slow rebound of household disposable incomes, and reduced use of savings reserves accrued during the COVID-19 pandemic. Additionally, deceleration in population growth poses another challenge.
Ultimately, Westpac concludes that despite some encouraging developments, the path to consumer recovery remains extensive. “Despite some more promising signs, the consumer recovery still has a long way to go.”
These insights and forecasts, grounded in Westpac’s research and national data, highlight the complex road to recovery facing Australia today, encouraging consumers and policymakers alike to brace for a protracted economic landscape.
Published:Friday, 1st Nov 2024 Source: Paige Estritori
Please Note: If this information affects you, seek advice from a licensed professional.
Westpac Banking Corporation is undertaking a significant transformation, focusing on expanding its business lending capabilities to better serve Australia's small and medium-sized enterprises (SMEs). This strategic shift involves replacing traditional in-branch tellers with dedicated bankers specialising in home and business lending, aiming to provide more personalised and efficient services to business clients. - read more
Loan Market Group's (LMG) Asset Finance Exchange (AFX) has achieved a significant milestone, reporting approximately $80 million in settlements within its inaugural year. This accomplishment underscores the increasing demand for asset finance solutions among Australian small and medium-sized enterprises (SMEs). - read more
The Australian Securities and Investments Commission (ASIC) has issued a call for the private lending sector to elevate its standards, aiming to align more closely with established banking practices. This initiative follows a comprehensive review that revealed inconsistencies in reporting, opaque fee structures, and inadequate risk disclosures within the industry. - read more
Macquarie Bank has been honored as the Investment Property Lender of the Year in Money magazine's 2025 Consumer Finance Awards. This accolade highlights the bank's commitment to providing flexible and tailored loan products for property investors. Find out now if you qualify and compare rates, offers and options from multiple lenders - without a credit check! - read more
The Australian mortgage market has witnessed a significant surge in refinancing activity, with nearly 100,000 loans refinanced in the June 2025 quarter. This marks the highest level since September 2023 and reflects homeowners' proactive responses to recent interest rate cuts by the Reserve Bank of Australia (RBA). Find out now if you qualify and compare rates, offers and options from multiple lenders - without a credit check! - read more
In today's digital age, the landscape of borrowing has evolved with the emergence of online loans. The convenience and accessibility offered by online lenders have made them an increasingly popular choice for Australians seeking financial assistance. However, it is essential to approach online borrowing with caution and make informed decisions to ensure smart borrowing practices. - read more
Welcome to the beginning of your financial journey. As an Australian, understanding the nuances of financial planning is pivotal to securing your economic future. Whether you're applying for your first loan or on the cusp of retirement, the financial decisions you make will have a lasting impact on your life. This guide aims to walk you through each stage, providing practical advice that you can apply to your own circumstances. - read more
Loan management skills are crucial for individuals and families in Australia, as they play a vital role in managing finances and achieving financial stability. Effective loan management enables individuals to make sound financial decisions and avoid falling into debt traps. This article aims to highlight the importance of acquiring loan management skills and how it can benefit Australians. - read more
The loan approval process can often seem complex and daunting, but understanding what it entails is the first step toward boosting your chances. In essence, loan approval is the lender's process of assessing whether you are a viable candidate for the loan you have applied for. This involves evaluating your financial history, current financial status, and the potential risks involved in lending to you. - read more
Need Help Finding a Loan?
Find out now if you qualify and
compare rates, offers and options from multiple lenders - without a credit check!
All finance quotes are provided free (via our secure server) and without
obligation. We respect your
privacy.
Knowledgebase
Underwater Mortgage: A mortgage in which the balance owed on the loan is greater than the value of the property securing the loan.
