There are lots of news stories painting a grim outlook for Australia’s economy at the moment. We are facing challenging economic times with rising inflation domestically and across the globe. There are a number of indicators that we may be heading for a recession.
It’s daunting reading gloomy projections about the economy and it’s important to be well-informed, so we can anticipate and make contingency plans. However, no one knows for sure what will happen in the future and it’s important to take note of the current juxtaposition between the headlines and reality. Because the good news is, in Australia right now, the job market is still thriving, and unemployment is low.
From a recruiting perspective, our number one issue is trying to find enough workers to fill the positions. It remains a time of significant opportunity for employees ready to step up in their career.
Are you concerned about Australia’s risk of recession? If so, that’s reasonable.
If Australia does go into a recession, we will see a sustained period of weak or negative growth in our GDP output. This would then be accompanied by a significant hike in the unemployment rate.
Fortunately, we’re not there yet (and may manage to avoid it). According to former Treasury economist Warren Hogan, quoted in this recent ABC article, “there is now a 50 per cent chance of a recession in Australia next year. (Hogan) blames higher interest rates, reduced tolerance for larger budget deficits and slower global growth.”
Meanwhile, Goldman Sachs Group Inc. are predicting a 25% chance of a recession in Australia over the next 12 months, while cautioning that a sharp US downturn would lift those probabilities to around 50-60%.
It’s helpful to be reminded that many professional economists are predicting that it could go either way, there’s still cause for optimism
Avoiding a self-fulfilling prophecy
It’s interesting to note that expectations about the economy can be self-fulfilling. For instance, if enough people believe that inflation will stay high or get worse, they will most likely take action (such as by demanding higher pay). This can then send prices higher in a self-perpetuating cycle given that organisations then typically raise process to offset their increased labour costs.
In order to avoid contributing to adverse economic circumstances, we should all be mindful of staying informed but also remain open-minded and hopeful.