Throughout the past two years, central bankers and politicians the world over have been reaching deep into their kit-bags to produce metaphors which describe their hopes for their respective economies. Talks of ‘soft landings’, ‘narrow paths’ and ‘even keels’ have all entered the accepted lexicon of our economic discussion.
As managers of our investors’ hard earned wealth, it is our job to exercise caution. And while the last couple of years has been punctuated by elevated volatility, there has never been a time in our history completely free of economic, political or some other risk. Indeed, as we begin the last quarter of 2023, there is cause for measured optimism with a resilient local economy holding firm. In short, this is not time to be a Chicken Little.
Let’s start with economic growth.
As inflation around the world soared, central banks countered this with aggressive interest rate hiking cycles. The desired outcome of this is to temper demand, slow consumption, and therefore slow economic growth.
And it has worked. Global growth is predicted to slow to 2.6% in 2023 with CBA predicting a further slowdown to 2.2% for 2024 as the impact from higher interest rates continues to flow through. However, as we have been reiterating throughout, low growth is better than no or negative growth.
Domestically, economic growth numbers are subdued, particularly on a per-capita basis (which is now technically recessionary), but they are positive, and forecast to stay positive this year and next. A story of positive growth will mean we will avoid a recession in Australia, potentially achieving the Reserve Bank’s long-coveted ‘soft-landing’. Great news for our economy and our standing internationally.