{"id":188813,"date":"2025-04-30T13:30:44","date_gmt":"2025-04-30T03:30:44","guid":{"rendered":"https:\/\/propertyupdate.com.au\/?p=188813"},"modified":"2025-04-28T10:24:39","modified_gmt":"2025-04-28T00:24:39","slug":"why-australia-is-unlikely-to-fall-into-recession-and-why-that-matters-for-property-investors","status":"publish","type":"post","link":"https:\/\/propertyupdate.com.au\/why-australia-is-unlikely-to-fall-into-recession-and-why-that-matters-for-property-investors\/","title":{"rendered":"Why Australia Is Unlikely to Fall into Recession (And Why That Matters for Property Investors)"},"content":{"rendered":"

You\u2019ve probably noticed the headlines predicting doom and gloom \u2014 again.<\/p>\n

Recession whispers are growing louder, with interest rate falls, global uncertainty, and consumer stress dominating the news.<\/p>\n

But are we really headed for a recession here in Australia?<\/p>\n

According to Shane Oliver,<\/a> Chief Economist at AMP, the answer is a reassuring no<\/em>.<\/p>\n

And I tend to agree.<\/p>\n

Let\u2019s unpack why Australia is likely to dodge a recession bullet \u2014 and what that means for savvy property investors.<\/p>\n

\"Trump<\/a><\/p>\n

First, What Even Counts as a Recession?<\/span><\/h2>\n

There\u2019s a bit of confusion out there.<\/p>\n

The traditional definition of two consecutive quarters of negative economic growth is widely quoted.<\/p>\n

But the RBA and Treasury use a broader lens.<\/p>\n

They look for sustained weakness across several indicators: GDP, jobs, income, and spending.<\/p>\n

That\u2019s important.<\/p>\n

It means a short-lived dip doesn\u2019t necessarily qualify as a recession \u2014 especially if unemployment stays low and the economy bounces back.<\/p>\n

So, Are We in Trouble? Not Exactly.<\/span><\/h2>\n

We\u2019ve definitely seen the economy slow down.<\/p>\n

GDP growth was weak over the last few years, and it\u2019s likely to remain sluggish over the next few months.\"Gdp<\/a><\/p>\n

But here\u2019s the thing \u2014 this is more of a \u201cslow patch\u201d than a full-blown recession.<\/p>\n

As Shane Oliver puts it, \"it's a per capita recession, but not a recession in the traditional sense.\"<\/p>\n

A per capita recession occurs when economic output (GDP) per person declines, meaning there is less economic activity available for each individual.<\/span><\/p>\n

\u00a0<\/span>This is different from a traditional recession, which focuses on overall economic growth.<\/span><\/p>\n

\"pencil<\/picture><\/span>

Note: <\/span> In simple terms: Imagine a cake. <\/span>If the cake (overall economy) gets smaller but the number of people (population) stays the same or increases, then each person gets a smaller slice of the cake (lower per capita GDP).\u00a0<\/span>That's a per capita recession. <\/p><\/div><\/div><\/span><\/span><\/span><\/p>\n

The 7 Reasons Australia Will Likely Avoid a Recession<\/span><\/h2>\n

Here are 7 solid reasons why we\u2019re not heading into a full-scale downturn that I think they make a compelling case:<\/p>\n

1. Australia has been resilient in recent decades<\/h3>\n

The old saying used to be that \u201cwhen the US catches a cold Australia catches the flu\u201d.<\/p>\n

In other words, US economic downturns lead to even bigger downturns in Australia.

<\/div><\/p>\n

However OLiver points out that while Australia certainly experienced deep recessions in concert with the US in the early 1980s and 1990s, apart from the pandemic \u2013 which does not really count as it was due to health orders to stay at home \u2013 this has not been the case in recent decades.<\/p>\n

Australia avoided recession in both the tech wreck and Global Financial Crisis.<\/p>\n

2. The global economy should avoid recession<\/h3>\n

Oliver explains that the , the US is at high risk of recession, but global growth is more likely to slow than go into recession.<\/p>\n

This means the second-round effect of weaker global growth on our exports, while significant at maybe 0.5% of GDP over a year, is unlikely to be devastating.<\/p>\n

He explains:<\/p>\n

The US is most at risk because it has threatened virtually all of its trade whereas other countries are only seeing their trade with the US impacted.<\/p>\n

Given Trump\u2019s ongoing policy chaos and the associated uncertainty which is hitting US confidence and decisions to spend and invest along with supply chain disruptions, the risk of a US recession is high at around 45% with 1% to 1.5% likely to be knocked of US growth.<\/p><\/blockquote>\n

3. Only 5% of our exports go to the US<\/h3>\n

The 10% US tariff on our exports is bad news for industries affected and there is likely more to come for pharmaceuticals (worth $2bn a year).<\/p>\n

However, only 5% of Australian exports go to the US. Oliver explains:<\/p>\n

This is worth less than 0.9% of our GDP and much of this will still continue, albeit the tariffed goods will now more expensive in the US.<\/p>\n

What\u2019s more much of it is fungible such as the $3.6bn in gold exports and $6.1bn in beef and should be able to find other markets.<\/p>\n

So, all up the direct hit to GDP growth is probably only 0.1% at most.<\/p><\/blockquote>\n

4. A lower $A will provide a shock absorber<\/h3>\n

Oliver explains:<\/p>\n

A plunge in the value of the Australian dollar partly explains why Australia was protected from the tech wreck, the GFC (the $A fell 39% at the time) and the pandemic (when it fell 19%) and the same is likely to apply this time.<\/p>\n

Since its high last September to its recent low as share markets plunged, the $A has fallen about 14% against the $US, reflecting fears about the outlook for global growth and commodity demand.<\/p>\n

This helps support the Australian economy by making Australian exports relatively cheaper (offsetting the impact of the tariffs) and boosting the Australian dollar value of commodities when their US dollar value is falling.<\/p><\/blockquote>\n

5. The RBA has plenty of scope to cut rates<\/h3>\n

If Australia's economy runs into trouble, unlike going into the pandemic when the cash rate was just 0.75% the RBA has plenty of scope to cut this time around as the cash rate is at 4.1%.<\/p>\n

\u00a06. Election promises point to easing fiscal policy<\/h3>\n

Oliver believes that with the Federal election now less than three weeks away Australians are being bombarded with spending and tax break commitments from both sides of politics.<\/p>\n

The spendathon is bad economics, but points to a further easing in fiscal policy imparting a modest stimulus for the economy.<\/p>\n

\"Dall\u00b7e<\/p>\n

7. Trump may be getting a bit \u201cyippy\u201d<\/h3>\n

Oliver says:<\/p>\n

\"The past week has seen Trump blink in the face of the market mayhem he was causing and the backlash from American consumers and businesses.<\/p>\n

The justification for the tariffs was always hard to pin down precisely with talk of: \u201cescalating to de-escalate\u201d as part of a negotiation to get better trade deals; retaliation for foes and allies \u201cripping us off\u201d; border control and drugs; annoyance at other countries various regulations and value added taxes; to raise revenue with an \u201cExternal Revenue Service\u201d to pay for income tax cuts; to bring production back to the US to usher in a new golden age; as part of a \u201cdetox\u201d for the economy; and with some concluding it\u2019s all part of a strategy to cause a recession and lower interest rates so US debt could be refinanced at lower rates.<\/p>\n

And the formula used to drive the reciprocal tariffs (trade deficit with country divided by imports from that country) made no economic sense.\"<\/p><\/blockquote>\n

Some other factors<\/span><\/h2>\n

1. Population Growth Is a Major Buffer<\/h3>\n

With near record levels of immigration, our population keeps growing faster than almost every other developed nation<\/p>\n

More people = more demand for housing, goods, and services.<\/p>\n

It\u2019s not the whole answer, but it certainly helps prop up aggregate GDP and consumption.<\/p>\n

2. Strong Labour Market<\/h3>\n

Unemployment is hovering around 4.1%, and job vacancies remain high.<\/p>\n

Sure, we\u2019re seeing some softening, but this is still an incredibly tight labour market.<\/p>\n

That alone keeps money flowing through the economy and staves off a dramatic pullback in household spending.<\/p>\n

3. Inflation Is Cooling<\/h3>\n

This one\u2019s crucial. Headline inflation is falling, and underlying (core) inflation is tracking lower too.<\/p>\n

That means we\u2019re going to see lower interest rates which would be a welcome relief for borrowers and investors alike.<\/p>\n

4. Fiscal Policy Is Still Supportive<\/h3>\n

The federal government is not splashing cash like it did during COVID, it hasn\u2019t slammed on the brakes either.<\/p>\n

Infrastructure spending and energy rebates are providing targeted stimulus.<\/p>\n

What This Means for Property Investors<\/span><\/h2>\n

This is where I think it gets interesting.<\/p>\n

In times like these, the media noise gets louder, and many investors retreat to the sidelines.<\/p>\n

But history tells us that opportunity often arises when others are fearful.<\/p>\n

If we avoid a recession \u2014 and it looks like we will \u2014 that means:<\/p>\n

\u2705 Employment will remain strong
\n\u2705 Migration-driven demand will keep rising
\n\u2705 Interest rates will keep falling throughout 2025
\n\u2705 The current soft patches in the property market may present a rare countercyclical entry point<\/p>\n

In other words, this could be a prime time to act strategically<\/em>.<\/p>\n

Final Thoughts<\/h3>\n

Shane Oliver\u2019s analysis is a welcome dose of reason in a market dominated by fear and misinformation.<\/p>\n

Yes, the economy is slowing.<\/p>\n

Yes, there are headwinds. But no \u2014 we\u2019re not falling off a cliff.<\/p>\n

For property investors who understand the bigger picture, this is a time to stay the course.<\/p>\n

Or better yet, make your move while others hesitate.<\/p>\n

Because as I often say: Don\u2019t wait to buy property. Buy property and wait \u2014 especially when the fundamentals are quietly lining up in your favour.<\/p>\n