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Catch up on our latest Executive Roundtable

The AANA, IAB Australia, and Media Federation of Australia boards came together at KPMG for an insightful discussion on the state of the economy for 2024.

We heard from Dr Brendan Rynne, Chief Economist at KPMG and Saul Eslake, Australian Economist and Commentator as they shared critical insights and an economic outlook for 2024.

❑ Almost all developed economies have experienced a surge in inflation since mid-2022
− partly reflecting common global factors (higher food & energy prices resulting from the war in Ukraine, and Covid-related supply
chain disruptions), and partly reflecting the widespread monetary policy mistake of leaving interest rates “too low for too long” made by all developed economy central banks

❑ In response, developed economy central banks have lifted interest rates sharply over the past 14 months
− and there are now clear signs in almost all economies that inflation has passed its peak, though it remains too high to allow central banks to start cutting rates, especially while labour markets remain tight

❑ It remains unclear whether inflation can be brought under control without triggering recessions
− prospects for a ‘soft landing’ look better in the US than in Europe

❑ China’s economic slowdown is structural, and set to continue through this decade

❑ Australia’s experience of inflation is thus by no means unique
− even though the RBA has lifted interest rates by more, and more rapidly, than at any time in the past 30 years, they remain below levels in most comparable countries – which means inflation may come down more slowly than in other countries

❑ Most likely, Australian interest rates will remain at their current level for at least another 12, possibly 18 months,
before inflation has fallen to a level that will allow the RBA to begin cautiously lowering rates
− the main risk to that view is the possibility of a further acceleration in wages growth in a tight labour market, especially if productivity growth remains weak

❑ There’s a better-than-even prospect that Australia will avoid a recession, in part thanks to rapid population
growth and ongoing growth in business and public investment− we’ve already had two quarters of negative growth in per capita real GDP
− consumer spending will soften further and remain weak through 2023-24
− and the unemployment rate will likely rise by around 1 percentage point over the next 12-18 months