Small Business Finance :: News
SHARE

Share this news item!

Australia's Path Out of Recession: A Long Road Ahead

Australia's Path Out of Recession: A Long Road Ahead

Australia's Path Out of Recession: A Long Road Ahead?w=400
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

Share this news item:

Finance News

Overheads on Enhanced Vetting Could Ratchet Up Wholesale Fund Costs Overheads on Enhanced Vetting Could Ratchet Up Wholesale Fund Costs
07 Nov 2024: Paige Estritori

The prospect of intensified scrutiny in confirming wholesale investor status could potentially tip the balance of competitiveness away from wholesale funds. According to recent commentary from the Financial Services Council (FSC), implementing added verification processes might impact these funds' ability to compete effectively. - read more
RBA Chief Under Fire: Decision on Rate Cuts in the Spotlight RBA Chief Under Fire: Decision on Rate Cuts in the Spotlight
07 Nov 2024: Paige Estritori

Reserve Bank of Australia (RBA) Governor Michele Bullock is set to face intense scrutiny over the central bank's conservative approach to cutting interest rates, as apprehensions about inflation persist in Australia. During a regular parliamentary session, Bullock’s policies will draw pointed questions from lawmakers. - read more


Business Loans Articles

Top reasons why small business loans are denied and how to avoid them Top reasons why small business loans are denied and how to avoid them
Small businesses often require loans to grow and expand their operations. However, not all loan applications are approved, and denials can be frustrating and demotivating for business owners. Understanding the reasons behind loan denials is critical to avoid making the same mistakes and increase the chances of future loan approvals. - read more
Avoid the Common Pitfalls: Expert Advice on Startup Loan Applications in Australia Avoid the Common Pitfalls: Expert Advice on Startup Loan Applications in Australia
Embarking on a startup journey is an exhilarating challenge that requires not just a brilliant idea, but a solid foundation of financial support to turn that idea into reality. Finding the right funding can be a make-or-break moment for many startups. Here, preparation is more than just a good practice; it's the backbone of any successful loan application. - read more
Avoid the Common Pitfalls: Expert Advice on Startup Loan Applications in Australia Avoid the Common Pitfalls: Expert Advice on Startup Loan Applications in Australia
Embarking on a startup journey is an exhilarating challenge that requires not just a brilliant idea, but a solid foundation of financial support to turn that idea into reality. Finding the right funding can be a make-or-break moment for many startups. Here, preparation is more than just a good practice; it's the backbone of any successful loan application. - read more
Investing in Growth: How to Finance Your Business Expansion Strategically Investing in Growth: How to Finance Your Business Expansion Strategically
Australia's dynamic SME landscape is ever-evolving, constantly presenting new opportunities and challenges for today's entrepreneurs. Growth is not just a goal but a necessity for these small and medium enterprises to thrive in the competitive market. As these businesses stand on the cusp of expansion, it becomes critical to recognize the indicators for growth and to approach this next stage with a robust strategic plan. - read more


Need Help Finding a Loan?
Loan Amount:
Postcode:

All finance quotes are provided free (via our secure server) and without obligation.
We respect your privacy.

Knowledgebase
Derivative:
A financial security whose value is dependent upon or derived from an underlying asset or group of assets.