1991–1992: The early 1990s recession mainly resulted from Australia's efforts to address excess domestic demand, curb speculative behaviour in commercial property markets and reduce inflation.
When was Australia's last recession? Australia suffered a recession from 1990 to 1991 when GDP fell by 1.7 per cent and the unemployment rate rose to 10.8 per cent. In 1991, interest rates were at an all-time high and so was the inflation percentage.
When has Australia been in a recession? Australia has been in a lengthy recession before, but it was a long time ago. The first recession, since the development of the United Nations' System of National Accounts, was recorded 1974-75, the second in 1982-83 and the most recent recession occurred in 1991-1992.
Australia is moving closer towards a recession and its chances of experiencing one in the next year is sitting at around 50 per cent, according to economists.
Australia's economy was buoyed by large resource exports to China, whose economy rebounded quickly after the initial GFC shock (mainly due to expansionary fiscal policy).
If Australia enters a recession, many people will have a tough time, whether through job loss, home loss, or even just a struggle to pay the bills. Whole markets will tank or lose significant value and many businesses will likely go bankrupt.
Prices could fall further
If you buy in a recession, there is always the risk that prices could fall even further. That said, Australian property prices usually tend to rise in the long run, especially in capital cities. So if you're prepared to spend some time owning your property, you're likely to come out ahead.
Australia's 80 per cent recession risk
Research from the Reserve Bank estimates that Australia's risk of recession over this year and next could be as high as 80 per cent.
Overall Outlook
In a best-case scenario, the U.S. will likely see a 'soft landing' with low/slow growth across 2023 before picking up in 2024. However, a downside scenario is a real possibility and could see the U.S. enter a prolonged recession lasting well into 2024, as is currently forecast for the UK and Germany.
In general, a recession lasts anywhere from six to 18 months. For example, the Great Recession that started in December 2007 lasted 18 months. But the recession prompted by the pandemic in 2020 only lasted two months.
Higher interest rates that often coincide with the early stages of a recession provide an advantage to savers, while lower interest rates moving out of a recession can benefit homebuyers. Investors may be able to find bargains on assets that have decreased in price during a recession.
In a recession, interest rates will decrease, and a good loan deal will be more in reach. Some car manufacturers bring back special financing that can give you a remarkably low rate. During the recession, there are fewer car buyers as well.
The recession of 1990-91 was dominated by financial failure. In most cases, it was the fall in asset prices that meant that loans could not be repaid, thus transferring the distress to financial institutions. — Ian Macfarlane, former Governor of the Reserve Bank of Australia, speaking in 2006.
Geopolitical tensions, energy market imbalances, persistently high inflation and rising interest rates have many investors and economists concerned that a U.S. recession is inevitable in 2023. The risk of a recession rose as the Federal Reserve raised interest rates in its ongoing battle against inflation.
Preparing for a recession comes down to using strong economic times to your benefit. Focus on limiting your spending, forming a budget, building an emergency fund and eliminating high-interest debts.
Australia may continue to be the lucky country and avoid a recession in 2023, but its global peers may not be so fortunate. Chief economist at Australian Retirement Trust Brian Parker says that Australia is relatively well placed to handle the economic turmoil.
Australia's GDP is expected to grow by 1.6 per cent in 2023, followed by 1.7 per cent in 2024. Despite the bleak outlook, Treasurer Jim Chalmers is confident Australia will avoid a recession. The state of Australia's economy depends largely on the RBA's cash rate decisions.
Australia's housing prices have experienced the largest decline in a calendar year since the global financial crisis (GFC) in 2008, when home values fell 6.4 per cent nationally.
He said he expects prices will drop 35 percent over a three-year period, from their highest point in 2022, through to 2025.
High house prices in Australia are primarily driven by supply and demand imbalances, tax policies, low-interest rates, and rising household debt.
The consensus of economists in a Bloomberg survey shows a 65% chance of a recession in the next 12 months, up from 31% a year ago.
A deep recession would mean a steep drawdown in stock prices in 2023, these analysts said. By Siddiqui's calculations, the S&P 500 — which currently sits at 4,079 — could hit 3,000 this year. Rosenberg predicts 2,900. That would mean a loss of 26% to 29%.