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Deloitte Access Economics has criticised the Reserve Bank of Australia (RBA) for two rate rises made in early 2023, claiming in its latest quarterly report they were "unnecessary" and have prompted a further downgrade in the country's economic outlook.
In its latest Business Outlook report, the group forecasts real GDP growth of 1.5 per cent this year, down more than two percentage points from the 3.7 per cent growth recorded in 2022.
The expected decline is also attributable to the fact "households are hurting, dwelling construction is in the doldrums and the global environment is shaky".
"That downgrade is centred on our households, and a ‘consumer recession’ is now forecast in 2023, with household spending expected to finish the year below where it started," said Deloitte Access Economics partner and report lead author, Stephen Smith.
"At a cash rate of 3.6 per cent, most Australians will be just fine. Many, however, will not. In just 10 months, the cost of servicing an average $600,000 mortgage will have risen by more than $14,000 per year once those rate hikes are fully passed through.
"But that’s just the average, and there are plenty of mortgage holders on either side of those numbers."
Household consumption is expected to grow by just 1.1 per cent this calendar year, versus 6.5 per cent in 2022. Deloitte Access Economics estimates that rate will slow down further to 0.6 per cent in 2024 before recovering slowly in the years that follow.
The latest Financial Stability Review from the RBA suggests that under fairly typical baseline assumptions for income growth, inflation and unemployment, some 15 per cent of variable-rate, owner-occupier mortgage holders will be in negative cash flow by the end of 2023, and with many of these borrowers already projected to be in this position.
"On these numbers, at least 300,000 Australian households may currently be experiencing negative cash flow, with mortgage repayments and essential living expenses together exceeding household disposable income. That should shock all of us," Smith said.
The report also highlights renters are increasingly being squeezed by higher rents, with little respite in sight.
“This is an issue of supply and demand, but private dwelling investment is forecast to fall rather than increase through 2023, before recovering only modestly in 2024," the report's lead author said.
"Construction is expected to commence on significantly fewer houses and apartments compared to previous years – in fact, Deloitte Access Economics expects that 2023 will see construction commence on the fewest dwellings in more than a decade and almost 70,000 below the level commencements recorded in 2021.
"On these numbers, new housing supply would just barely keep pace with population growth, let alone ease what is a critical undersupply."
Forecasts vary by industry and state however, with higher than average growth rates expected in 2023-24 for health care and social assistance (4.4 per cent), accommodation and food services (4.4 per cent), and transport, postal and warehousing (4.3 per cent). In contrast, industries such as manufacturing (-1 per cent), construction (-1.3 per cent) and agriculture, forestry and fishing (3.4 per cent) are expected to go backwards over the same timeframe.
The consumer-led slowdown is forecast to hit hardest in New South Wales and Victoria, while "Western Australia and Queensland are relative bright spots, with mineral exports adding to the growth outlook".
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