The Reserve Bank is forecasting a year of recession and higher unemployment, which is bad news for workers, said CTU Economist Craig Renney.
“In cutting the Official Cash Rate by 0.25% to 5.25% today, the Reserve Bank cited a broad range of indicators suggesting the economy is contracting faster than anticipated. Business investment is due to fall for the next 18 months. Government spending falls for next 15 months, as does residential investment,” said Renney.
“There is a synchronised fall in demand across the economy. Its time to change track. Unemployment is now forecast to rise to 5.4% in June 2025. The previous forecast peak was 5.1% – nearly 10,000 additional people unemployed in just a short period of time. Given the rest of the data in this announcement, this might yet prove an optimistic estimate of where unemployment ends up. Average wages are forecast to rise in real terms by just 0.2% over the next year (instead of 1.7% in the year to June 2023). This is a really worrying set of forecasts.
“It’s now possible to see why the Bank chose to cut. But it looks like the damage has been done – and government policy is making this worse. Inflation is expected to be in the target band inside the next 6 weeks – but cuts to government investment continue for more than a year.
“It’s time to change track. While the fall in interest rates will be provide relief for some, there is a bleak future ahead for working people and the economy unless we change economic direction,” said Renney.