Economists are warning Australia could be tipped into a recession if the Reserve Bank overreacts to higher-than-expected inflation during its meeting next month.
The nation would already be on the verge of recession if not for the federal government’s stage 3 tax cuts, a new report by Deloitte Access Economics says.
Vital inflation figures from the June quarter will be released next month ahead of the RBA board’s meeting on August 5 and 6.
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Weak economic growth and stubbornly high inflation has put the Australian economy at a “fork in the road”, says Deloitte.
It leaves the RBA two choices, with both holding huge potential impacts for households and businesses.
“Down one road, a high June quarter trimmed mean inflation result could force the hand of the RBA to lift interest rates once more in early August, further crushing household and business confidence and wiping out the benefits of tax cuts and real wage gains in the second half of 2024,” the reports said.
“Down the other road, the June quarter inflation result may be more benign, consistent with the slower pace of growth in the Australian economy. That would see the RBA hold interest rates steady again next month, enabling households to lead a steady recovery in economic growth in 2024-25.”
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Economic growth in Australia has been sluggish at best, hampered by 12-year high interest rates and stubborn inflation.
The economy expanded by only 0.1 per cent in the first three months of the year, bringing annual growth to 1.1 per cent.
Deloitte forecasts the economy grow by 1 per cent through the whole of 2024.
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