Recession risk rises to 50:50 as doubts about Philip Lowe emerge

But Anthony, a former financial economist, said the probability of a recession in the next 12 to 24 months is very high at 50 to 70 percent because of the Reserve Bank’s actions.


He said while strong commodity prices would support the economy in the short term, the full impact of higher interest rates would hit Reserve Bank households whose real incomes are falling.

“If we have a recession, I think it’s going to be in 2024,” he said.

“The impact of higher interest rates on household balance sheets will really be felt next year.”

Lowe said this week the economy is expected to grow about 1.5 percent this year and next. Unemployment, currently at a nearly 50-year low of 3.5 percent, is expected to rise to 4.5 percent over the next two years.

And despite the hike in official interest rates, inflation is unlikely to return to the top of the RBA’s 2-3 percent target range before mid-2025.

Alex Joiner, chief economist at IFM Investors, said Australia’s relatively high rate of population growth would help the country avoid a recession.

But on a per capita basis, the next 12 to 24 months would be difficult for the economy.

“We may avoid defining a recession, but that’s what it’s going to feel like for most people,” he said.

“The bank spoke about the narrow path that the economy is walking. It’s more of a tightrope walk now.”

Hill was not the only Labor MP to have reservations about Lowe.

Rob Mitchell, Jerome Laxale, Julian Hill and Graham Perrett have all suggested that RBA Gov. Philip Lowe's seven-year term should not be extended.

Rob Mitchell, Jerome Laxale, Julian Hill and Graham Perrett have all suggested that RBA Gov. Philip Lowe’s seven-year term should not be extended.Credit:Alex Ellinghausen

Queensland Labor MP Graham Perrett said extending Lowe’s term is a matter for the Treasurer and his team, “but activist governors certainly bear additional risks”.

“And that could be problematic for the current governor in these extremely challenging times. He has baggage associated with his comments outside of RBA board meeting notes that he may find difficult to put down.”

NSW Labor MP Jerome Laxale criticized the RBA for using “outdated and outdated data” that did not take into account the impact of rate hikes on tenants, as landlords justified rent increases with rate hikes.

“Nearly 50 per cent of NSW [residents] Rent, 40 percent in my constituency. And they make these decisions without understanding the implications [renters],” he said.

There are growing concerns that the RBA's rate moves will hurt the housing sector.

There are growing concerns that the RBA’s rate moves will hurt the housing sector.Credit:Paul Rovere

“I would hope that since September until now the RBA has started this process to measure the impact of rate hikes on the most populous housing in NSW.”

Victorian MP Rob Mitchell said he already sees high levels of mortgage distress in his constituency.

“Volunteer organizations are seeing more and more people in mortgage distress, and it’s a good balancing act to help people without putting undue pressure on inflation.”

Western Australia Senator Louise Pratt said while she understands the need to control inflation, “the RBA needs to strike the right balance”.

Victorian Labor MP Josh Burns said budgets were feeling the pinch.

“I worry about the people I represent and their ability to manage the financial pressures on their household budgets,” he said.

Deputy Treasurer Stephen Jones told Sky News on Wednesday that “we hope this will be, if not the last, almost the last of the rate hikes”.

Chalmers would not dwell on Lowe’s future during an interview on ABC RN breakfastDodging questions about whether the governor’s term would be extended.


“As for the reappointment of the governor, his term doesn’t end until September. Normally, this appointment would be closer to mid-year. When the time comes, I will do the usual consultation with my colleagues and we will come for a visit,” he said.

The Reserve Bank regulation bill makes it extremely difficult for the treasurer of the day to fire the RBA governor.

The governor must resign if he becomes “permanently disabled,” goes bankrupt, or takes up paid employment outside the bank. A governor and his deputy also serve “subject to good conduct”.

Green Party finance spokesman Nick McKim, who called on Lowe to step down on Tuesday and urged Chalmers to reverse the latest rate hike, said the RBA was hurting the lives of ordinary Australians.

“Jim Chalmers cannot stand by and watch the RBA push the economy into recession. The RBA’s insistence on a rate hike despite clear signs of economic distress is unacceptable,” he said.

Break through the noise of federal politics with news, perspective and expert analysis from Jacqueline Maley. Subscribers can sign up for our weekly Inside Politics newsletter here. Recession risk rises to 50:50 as doubts about Philip Lowe emerge

Callan Tansill

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