Can Australia Escape a Recession?

The Australia Letter is a weekly newsletter from our Australia bureau. Sign up to get it by email. This week’s issue is written by Natasha Frost, a reporter with the Australia bureau.

In September 2020, as the effects of the coronavirus pandemic hit all over the world, Australia dipped briefly into a recession — then bounced straight back out again the following year.

The nation sometimes referred to as “The Lucky Country” is known for its rock star economy: a gold-plated combination of rich natural resources, easy trade, a talented, well-educated work force and historically healthy immigration rates.

That economic wobble in late 2020 was as rare as it was brief: Australia had not been in recession since 1991, even skirting neatly by the 2008 global financial crisis.

The rest of the world faces a grim outlook, with recession likely for Britain, the United States and many of the member states of the European Union, among other nations. Kristalina Georgieva, the head of the International Monetary Fund, has said she expected a third of the global economy to enter a recession in 2023. So where does Australia stand?

For now, very few economists in Australia are forecasting a recession — two back-to-back quarters of negative economic growth — as their central case, said Nicki Hutley, an independent economist based in Sydney. “I wouldn’t be in there yet, but I would certainly rate it as at least a 50 percent chance,” she said.

In many respects, Australia is doing better than its international peers. Wages remain fairly restrained, the economy is growing, and the unemployment rate is at a record low 3.4 percent. The country is also less affected by the shock of high energy prices already bedeviling Britain and Europe. Consumer spending also remains strong, even as Australians have dipped into their savings for discretionary goods and services.