AMP senior economist Diana Mousina said there was now a real risk the Reserve Bank could be forced into cutting interest rates next year to support an economy weakened by its aggressive increases in rates through 2022. | Shane Wright
The Australian economy is facing a slowdown that could drive up unemployment next year, with growing fears the Reserve Bank may lift interest rates too high too quickly on heavily indebted home buyers as it fights inflation.on Thursday , which some analysts believe could drive the world’s largest economy into recession, experts now think there is a chance the Australian economy could contract during a quarter in 2023.
But AMP senior economist Diana Mousina said there was now a real risk the Reserve Bank could be forced into cutting interest rates next year to support an economy weakened by its aggressive increases in rates through 2022. “The impact of interest rate rises will hit consumers harder in Australia compared to some of our global peers,” she said.“The risk is that the RBA is not giving itself enough time to see the impacts of rate rises done so far, so the cash rate could overshoot in the short term, although this could mean that rates eventuallyNomura research analyst Andrew Ticehurst, who is expecting the Reserve Bank to lift interest rates by another half percentage point in October on its way to a 3.
“A quarterly contraction in economic activity in 2023 is a distinct possibility though recession is not our base case; it can be avoided provided the RBA does not make monetary policy too restrictive,” he said. Westpac chief economist Bill Evans said the index was pointing to a material loss in economic momentum, tipping the economy to expand by 0.6 per cent in the December quarter after 1.1 per cent in the September quarter.
Last week, Reserve Bank governor Philip Lowe said darkening global economic clouds would make the bank’s job of achieving a soft landing more difficult.
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