Why Australia is already in a recession (but the RBA can’t afford to cut interest rates)

 

Signal or Noise is a show that is designed to make sense of data and headlines - and 2023 had both of those in spades. 

For starters, 2023 revealed just how much 425 basis points in rate hikes from the Reserve Bank of Australia is affecting the economy. Economic growth has slowed markedly and inflation is still more than double the RBA's target. But the labour market remains remarkably resilient, fuelled by migration and a choice of more hiring over increasing existing productivity.

This year was full of market-moving headlines too. The reopening of China stumbled. Credit Suisse and Silicon Valley Bank collapsed. Labour strikes dominated the Northern Hemisphere summer. Wars in Eastern Europe and the Middle East fuelled wild swings in commodity prices. And the influence of AI and Warren Buffett on American and Japanese stocks respectively have all dominated the front pages at one point or another this year. 

So what did all this headline-reaction-new headline-new reaction pattern produce in terms of returns? 

The ASX 200 will finish the year up around 8%, the equal-weight S&P 500 will likely finish the year up around 10%, and both the Australian Dollar and US 10-year bond yield will likely finish the year where they started.

Exhausted and confused? You're not alone. 

To walk us through the year it has been and to preview what may happen in 2024, Signal or Noise presents its season finale. Moderator Hans Lee jumps in the chair one last time alongside series regular Diana Mousina of AMP. They are also joined by these panellists:

• Raaz Bhuyan, Principal and Portfolio Manager at WaveStone Capital
• Jonathan Kearns, Chief Economist at Challenger Group

Note: This episode was taped on Wednesday 13 December 2023. You can watch the show, listen to our podcast, or read the edited summary here.