Australian Economy Struggles With Inflation, But Recession is Highly Unlikely
According to the CEO of NAB, the Australian economy is affected significantly by inflation, as it was at a 30-year high. However, he dismissed any fears of recession and even called it 'highly unlikely'.
The fact that this reassuring news is coming from one of the top 3 retail banks in the world makes it even more credible.
Although the inflation is slowing down, it is still hurting Australian citizens if we look back at the last 18 months. After all, inflation levels that were at 3 decades high a few months ago are sure to hurt the average citizen of Australia.
When asked about the recession risk, he added that the topic requires more discussion, but the chances of that happening are very slim. He also added that the Australian economy is facing multiple headwinds, but even that's not enough to stop the economic engine.
Australia: Peak inflation Was 8%
In 2023, Australian inflation reached a high of 8%, from where it went lower after the central bank's intervention. From May 2022, the RBA is issuing small rate hikes in an attempt to tame the wild beast of 'inflation.' As a result of these actions by the RBA, the inflation now stands at 6%, while the central bank's target is 2 - 3%.
NAB, along with other lenders in Australia, has the lion's share of the mortgage market. According to their numbers, only a minor increase was witnessed in late repayments, mainly because of the strong labor market.
Looking ahead, the experts believe that things will turn around for the Australian economy as we approach the last few months of 2023.
One particular factor that gives credence to this optimism is the fact that immigration levels have returned to the pre-COVID levels once again.
As of now, $1 (US Dollar) is equivalent to around 1.5418 AUD (Australian Dollars). Going forward, the exchange rate of the AUD/USD will be highly dependent on the policy rate of the Fed and the RBA.