Australia

Economic activity in Australia has remained surprisingly strong. We continue to see full-year 2022 gross domestic product (GDP) growth
in a range of 3% to 3.5%, as a tight labour market continues to support domestic demand. We believe Australia will avoid a recession in 2023, unlike our view for most other developed markets. We foresee full-year 2023 GDP growth slowing to around 1.5% as interest rates move into restrictive territory.

The RBA raised its cash rate target by 25 basis points to 2.6% at its October meeting, a slowing of its pace after four consecutive 50-basis-point hikes. The slowing pace acknowledges the bank’s inherent trade-
off between aiming to tame inflation and avoiding moves that could invite recession.
It has more room to manoeuvre than other developed markets central banks, given lower inflation and wage pressures in Australia.
We expect the RBA to increase the cash rate to a range of 3.5% to 4% by mid-2023. We believe that such a step is necessary to bring inflation back to its 2% to 3% target range, which we expect to occur in early 2024.

The consumer price index (CPI) rose by 7.3% in the 12 months ended 30 September, compared with 6.1% in the 12 months ended 30 June.
We believe inflation in Australia won’t reach peaks in and near double digits as in some other developed markets. Emergence from COVID lockdowns and associated spending…

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