Is Australia heading for recession?

Australia may continue to be the lucky country and avoid a recession in 2023, but its global peers may not be so fortunate.

Chief economist at Australian Retirement Trust Brian Parker says that Australia is relatively well placed to handle the economic turmoil.

"You should be worried whenever an economist says that. When an economists say something looks relatively well placed, it's like saying 'I'm a relatively good-looking guy in a room full of ugly people'," he says.

Australia hasn't had a recession since the 90s when GDP fell by 1.7% and the unemployment rate rose to 10.8%.

Technically, the country fell into a recession in the June quarter of 2020 following two consecutive quarters of GDP falling.

However, due to COVID and employment stability, many in the industry do not consider it reflective of a traditional recession.

This time round, Parker says Australia doesn't have the same wage pressures as say the United States and the country's exposure to a Chinese upswing should help protect us.

"We have a commodity heavy economy in the equity market, so we are a relative beneficiary, and it's a painful thing to admit, of other people's suffering," he says.

Even when it comes to inflation, Parker says we are likely to continue to see better news come through on the figures.

Already the figures out of the Australian Bureau of Statics are showing that inflation is slowing, with the consumer price index falling to 6.8% last month, the slowest growth since June 2022.

"The RBA probably doesn't have a lot more to do, maybe one more and then they sit back for a bit," he says.

Parker's view is supported by three of the big four banks who expect a lift at the next RBA meeting, while investors are predicting the central bank will pause for the first time since last April.

Globally, however, there are likely to be some recessions particularly when looking at the United States and Europe.

"There is likely to be a moderate US recession if not later this year, then early next because the cost involved of bringing inflation down may result in a meaningful rise of the unemployment rate," Parker says.

Europe will feel similar impacts says Parker while the UK is already in a whole world of economic hurt.

"The UK is a former great economy in long-term decline but that doesn't mean there aren't investment opportunities in a declining economy, because there are," he says.

Head of investment strategy at Australian Retirement Trust Andrew Fisher says there is plenty of opportunity out there, particularly in the unlisted space, that is, investments that are not traded on the stock exchange.

"The only people who don't invest in unlisted assets don't do it because they can't. You need the scale, you need the cashflow in your portfolio to do these things," he says.

Particularly after 2022 when all asset classes had a fall, Fisher says unlisted assets can help shield you.

"In a year like that [2022] investing in alternative assets can insulate a portfolio to some extent."

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