Australia likely to avoid severe recession, KNL expert panel agrees

The cost of living in the country has risen by 7.8 per cent over the past year alone. This has had a significant impact on society, especially those on low incomes, as it affects their ability to afford necessities such as housing, food, and healthcare. Interestingly, we have seen an increase of approximately 3 per cent in small businesses in Australia over the last financial year.

Whilst the people of New South Wales have benefited significantly from the vouchers available on Service NSW, further insight on the overall cost of living pressure on both families and small businesses was discussed at length amongst the panellists at the recent Keeping News Local Greater Western Sydney launch.

“The globe is going through the change”, said Mr Joseph Rizk AM, Managing Director & CEO, Arab Bank Australia.

“I spent five weeks in the US and to see the impact that inflation is having there is very similar to Australia. The reality is there’s a big change process that we have gone through after a massive global impact, and that is COVID.”

It is believed that during this period, there was a surge in household savings of around $250-$300 billion, making it the largest increase in household savings on record, followed by the aftermath of freedom and a steep increase in spending.

“We also have the geo-political environment that impacted on fuel and electricity prices, and I don’t think this is something that is going to change in the short-term. I think this will likely continue for the next few years,” added Mr Rizk.

Speculation from economists, banks and the Reserve Bank has said that interest rates should start to decline next year because inflation is expected to decrease. However, how often do we see the cost of goods and services increase, and then decrease?

Former NSW Minister and Member for Ryde, Mr Victor Dominello, predicts “this decade, is going to be choppy because of two big players”. The first is COVID-19.

“COVID-19 pandemic meant that the world has been moved into trusted and non-trusted blocks, in terms of supply chains. That doesn’t take a year to resolve, that can take up to six years, and we’re only in year two. The second big play in terms of trusted blocks is inflation driven by the war in Ukraine,” Mr Dominello said.

“The shortage of potassium (fertiliser) caused by supply issues from Ukraine will lead to less yield from crops, which will have a massive squeeze on food supply… We are quite fortunate in Australia, but we will start to see that across the globe. Although Australia is an island, we are still connected to the globe for trade.”

High inflation rates can have a devastating effect on vulnerable people, including those already living in poverty.

President of the St Merkorious Charity, Mrs Paula Nicolas, said that some people are coerced to making hard choices.

“People come to us because they can’t afford basic life necessities such as food, rent, bills, clothing, [and] medicine… People are really struggling. Sometimes they need to choose between food or rent,” Mrs Nicolas said.

The St Merkorious President explains that in n the last financial year, 23 per cent of Charity’s income was from government funding and the rest from corporates.

”Homelessness is huge at the moment. It’s a big problem, and if we don’t support the vulnerable now, we will have a bigger problem in the future. We support people and clients in their homes, and if they don’t get that support, they are going to end up homeless on the street… the quicker we can help support people, the better it will be for all Australians,” Paula Nicolas said.

According to the World Bank, Australia’s poverty rate is 12.4 per cent. In a recent Curtin University study
, it was found that almost three million Australians live under the poverty line, and this includes 750,000 children. Approximately 25 per cent of single parents live in poverty and 10 per cent experience severe poverty.

“The reality is that the global change predicted by experts shows every country is looking to generate work and employment, so the product demand can continue. You can’t allow the most vulnerable people in our community to suffer,” says Mr Dominello.

According to Mr Rizk, ‘Australia will get through this’.

“There is a great thing about this nation: the majority of people are really good, honest and want to help their neighbour. We call this mateship. Mateship in Australia is really strong. We see it during times of bushfires, floods, and the pandemic. We can’t always rely on the government. The government can be supportive, but it’s up to us: the individuals, businesses and corporates. You are in the best country in the world. I can assure you; this country sits very pretty for the future,” said Mr Rizk.

The big question that was deliberated is, ‘are we heading towards another recession?’

Mr Rizk said there will be periods of downturn, reflecting on the 1990-1991 recession we ‘had to have’, according to the then Federal Treasurer, the Honourable Paul Keating.

“The reality is, we are not at this stage, looking at a recession in Australia,” said Mr Rizk.

“If the geopolitical and global pressures continue, with only 5 per cent growth in China (usually grows 8-9%), which is not good for the global market, we will start to see countries go into recession. Some parts of the world are already in recession, but I think Australia will manage itself quite well.”

Mr Dominello agreed with this thought.

“We are so fortunate in this country. You scratch the earth and money comes out of it,” he said.

Although it’s reassuring to learn that Australia may avoid a severe recession, the unstable global market and geopolitical tensions result in unpredictable and generally downward trends in growth and supply chains. This puts vulnerable individuals and people on the brink of poverty at significant risk, facing rising inflation, continued living cost increases, and an uncertain outlook in the next few years. It seems the protection Australia needs is mateship and community spirit in a nation that’s always been lucky with good people, fertile land, and a resilient economy.

Original article: https://keepingnewslocal.com.au/australia-likely-to-avoid-severe-recession-knl-expert-panel-agrees/