More than half of Australians expect a recession

While households remain under pressure, two thirds believe inflation has peaked or will come down over the next year.

The mood among Australians when it comes to the economy remains gloomy. Picture: NCA NewsWire / Damian Shaw

More than half of Australians still expect the economy will tip into recession in the coming year, even as households become more optimistic about their financial prospects, a new survey has revealed.

The quarterly Dye & Durham survey, conducted by Resolve Strategic, found a grim but improving mood among Australians.

Cost of living still dominates the list of worries – with 69 per cent of respondents citing high and rising prices as a “strong concern”, followed by housing affordability at 53 per cent.

Similarly, nearly half of all respondents said cost of living remained their highest priority and that it was the issue most likely to sway their choice on who to vote for – well above the next highest issue of housing affordability, at 11 per cent.

While households remained under pressure, two thirds now believe inflation has peaked or will come down over the next year. A similar proportion believe the Reserve Bank’s next move will be down.

A third of respondents said they thought interest rates would go higher again, versus nearly half in the previous survey.

While the quarterly Dye & Durham survey suggested some glimpse of an improving mood versus the end of last year, there were few such signs in Westpac’s monthly consumer confidence report.

The bank’s sentiment index dropped in April to stay in deeply pessimistic territory, which Westpac senior economist Matthew Hassan “marked an extended period of bleak sentiment reads by historical standards”.

“Indeed, outside of the deep recession of the early 1990s, this is easily the second most protracted period of deep consumer pessimism since we began surveying in the mid-1970s, with all other sentiment slumps lasting nine months or less,” Mr Hassan said.

“The absence of a sentiment recovery to date reflects the nature and duration of Australia’s inflation challenge,” he said.

Deepening the gloom has been the fact that real wages have gone backward by 6 per cent over the past three years,” Mr Hassan said.

“That has combined with a sharp increase in interest rates and a big lift in tax payments putting household incomes under intense, sustained pressure,” he said.

“The April sentiment update suggests consumers continue to expect progress on inflation and associated cost-of-living pressures to be slow.”

But Dye & Durham Australia managing director Dennis Barnhart said easing inflation and the prospect of some mortgage relief over the coming year could herald a turning point in Australians’ view on the economy and their personal finances.

“Sentiment seems to be stabilising and heading in a more positive direction,” Mr Barnhart said.

Over half of Australians, or 54 per cent, still believe the economy will enter recession in the next year, or, with the economy going backwards in per capita terms, say conditions are already recessionary.

That share was lower than the 58 per cent who expected a recession three months ago.

Fewer than a quarter of households, or 24 per cent, believe the country would avoid a recession.

Again, that was an improvement on the previous survey, when a lower 19 per cent said Australia would avoid a more severe economic downturn.

Inflation has dropped to 3.4 per cent in the year to February, from 6.8 per cent a year earlier, according to the monthly consumer price figures from the Australian Bureau of Statistics.

The RBA board has made it clear it needs more evidence that inflation has been tamed before easing rates, but has held the cash rate at 4.35 per cent since November.

The central bank board at its last meeting did not explicitly consider the case of a hike for the first time since May 2022.