Australia’s economy is set for a “sharper, longer slowdown”, major bank economists say, as the Reserve Bank is forced to keep interest rates higher to rid the nation of persistent inflationary pressures.
The RBA is widely expected to hit mortgage holders with a fifth rate hike on Tuesday, in a move that will push the cash rate to its highest since 2008 amid rising worries the economy could even be tipped into recession.
Belinda Allen, the head of Australian economics at CBA, said the extended Middle East conflict, collapsing house prices and a more aggressive central bank would drive real GDP down to just 1% by the middle of next year, nearly half the previous estimate of 1.8%.
Growth through 2027 would be barely stronger at an estimated 1.1%, according to the updated projections.
Allen said she had expected to see “signs of economic recovery” by the New Year, but now sees the…
