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The Reserve Bank of Australia (RBA) has suggested that a domestic recession might be an unavoidable step to curb the persistent rise in inflation. This sentiment was expressed by RBA Governor Michele Bullock, who candidly acknowledged the potential necessity of such a measure. “We don’t want to have a recession, but if it’s hard to get inflation down, then we’re going to have to deal with that, possibly,” Bullock stated, highlighting the difficult choices facing economic policymakers.
However, this perspective is not universally shared within the government. Treasurer Jim Chalmers, speaking on ABC’s 730 program, dismissed the notion of an impending recession. “No, that’s not something that we’re anticipating or forecasting or expecting,” he firmly asserted, presenting a more optimistic outlook for Australia’s economic trajectory.
Inflation continues to loom as the most significant threat to the Australian economy, exacerbated by a weakening job market. The contrast in viewpoints between the RBA and the Treasurer underscores the complexity and uncertainty of the economic challenges ahead. As the country grapples with these issues, the debate over the best course of action remains as heated as ever.
“No, that’s not something that we’re anticipating or forecasting or expecting,” Chalmers told ABC’s 730 program.
Inflation remains the biggest threat to the Australian economy and this has been compounded by a deflating job market.
Fresh job figures revealed the unemployment rate rose to 4.3 per cent in February after 35,000 people left the workforce.
Australian Bureau of Statistics (ABS) data also found the number of hours worked fell 0.2 per cent, with more workers on part-time hours rather than full-time.
Meanwhile, job advertisements took a tumble in the same period.
Ads decreased by 0.5 per cent month-on-month in February and are down 2.6 per cent year-on-year, according to the latest employment report from Seek.
Applications also dropped by 0.6 per cent as workers stay put in an uncertain job market.
“A sharp decline in jobs ads can be a bit of a red flag that demand is going to slow across the economy,” he said.
“Job ads are a forward-looking indicator of employer intent – when businesses pull back on hiring, it signals reduced confidence in future demand and activity.
“The current decline we’re seeing is steady but gradual, not a sharp decline that should trigger worry.”
Chapman tempered fears that a recession is fast approaching despite the declining job figures.
“Combined, these signals point to weaker demand and a labour market under increasing pressure, though the current data suggests a gradual slowdown rather than a sharp contraction,” he added.
Australia broke a 30-year dry spell after it entered a technical recession during the COVID-19 pandemic in 2020.
Before that, Australia suffered a recession from 1990 to 1991 when GDP fell by 1.7 per cent and the unemployment rate rose to 10.8 per cent.
What is a recession?
A recession is a prolonged period of weak or negative growth in Gross Domestic Product (GDP), which is the monetary value of all goods and services, is accompanied by a rise in unemployment, according to the RBA.
Essentially, if GDP goes down and unemployment goes up it can equal a recession.
A “technical recession” – which may not be accompanied by a jump in unemployment – is traditionally defined as two consecutive quarters of negative growth in GDP.
Several other economic indicators are also weak during a recession, including household spending, business investment and the number of businesses that close down.
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