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.
In a significant development for the Australian banking sector, ANZ has successfully completed its $4.9 billion acquisition of Suncorp Bank. This strategic move, finalised on 31 July 2024, marks a pivotal expansion for ANZ, enhancing its service offerings and market reach across the nation. - read more
The Australian mortgage market is witnessing a notable shift as non-bank lenders increasingly capture a larger share, challenging the dominance of traditional banking institutions. This trend is driven by digital innovation and evolving consumer preferences, leading to a more competitive landscape in home financing. - read more
In its latest monetary policy decision, the Reserve Bank of Australia (RBA) has opted to keep the official cash rate unchanged at 3.60%. This decision reflects the central bank's cautious approach in navigating the current economic landscape, balancing the need to control inflation with the goal of sustaining economic growth. - read more
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
For new borrowers, stepping into the world of loans can be overwhelming. There are numerous options available, and each comes with its own set of terms, interest rates, and features. - read more
Understanding your credit score is crucial, especially when you're looking to secure a loan. Whether it's for a home, a car, or personal use, a good credit score can make a significant difference in the type of loan you qualify for and the interest rates you'll be offered. - 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
Getting your loan approved is a significant milestone, but it also opens the door to many new responsibilities. Proper management of your finances after loan approval is crucial to avoid common pitfalls that could derail your financial stability. - read more
Navigating the complexities of loan repayments can be daunting, but understanding the components and their impact on our financial health is essential. In Australia, a wise approach to loan repayment not only alleviates financial strain but directly influences our credit scores and future borrowing capacity. - 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
Gross Domestic Product (GDP): The total value of all goods and services produced within a countrys borders in a specific time period.
