Is Australia heading for its first major recession in over 30 years?

The path to a soft landing is a narrow one, or so the RBA keeps telling us. But what are the actual risks facing the economy?

 
Prices in Australia have begun falling for consumers in a few key areas according to the latest Consumer Price Index (CPI).

May’s CPI showed inflation fell to 5 and a half per cent for the month – down from 6.8 per cent a month earlier.

The Reserve Bank has been raising interest rates to try and bring that figure down even further.

Aside from a brief pause to this campaign in April, the country’s cash rate is at its highest point since 2012 – at 4.1 percent.

And the Bank’s Governor Philip Lowe is under the pump for that decision acknowledging that high interest rates do cause economic hardship for people in their own right.

However, he says the pain of stubborn inflation can sting even worse for everyday people, and the RBA could be set to raise the cash rate even further on Tuesday.

But many economists argue this strategy also raises the risks of bringing Australia into its first recession since 1990.

That record may be the envy of the world, but it could soon be broken.

The Commonwealth Bank is the only one of Australia’s Big Four banks to believe that the RBA will not raise interest rates on Tuesday.