‘Chance of recession’: Westpac chief executive issues warning amid inflationary pressures, Middle East conflict

Westpac’s chief executive Anthony Miller has sounded the alarm Australia could slide into a recession as inflationary pressures and global tensions weigh on the cost of living. Appearing on the ABC’s That’s Business podcast earlier in the week, Mr Miller warned the country needed to be prepared for the “chance” of a recession occurring - complicated by events in the Middle East and the subsequent pressure placed on the Reserve Bank. “I think we need to acknowledge circumstances have changed so much that a recession... there is a chance,” Mr Miller told host Alan Kohler. Oxford Economics has already warned the global economy could feel the impacts of soaring oil prices and a prolonged downturn, if the Middle East conflict extends for another two months. The company warned in the worst case scenario, the price of Brent oil would peak at US$190 ($A276) a barrel by August - which would drive the world into a global downturn. The Reserve Bank has already hiked Australia’s official cash rate up another 25 basis points, from 3.85 to 4.10 per cent - the second in just two months. Mr Miller said told the podcast another rate rise would “return us to where we started when there was a rate reduction program” - explaining it “wouldn’t be any worse” than 2025. “The world has moved, and continues to move, in strange and unusual ways,” he said. “Other stressors are coming through for consumers. “We would anticipate after the next interest rate rise - if there is another needed - that would go some ways to slowing the economy in the way the Reserve Bank wants, to deliver the reduction in demand and the pullback on inflationary challenges.” On Thursday, Westpac joined the other major banks in hiking fixed rates by 0.45 percentage points. The move means none of the big four banks offer a fixed rate under 6 per cent - with NAB offering the lowest at 6.04 per cent for a 1-year term. Canstar.com.au insights director Sally Tindall said the move showed just how quickly the rate cycle had shifted. TAD-1948 Inflation Graph “With more than 60 lenders lifting fixed rates since the RBA’s March meeting, it’s clear the market is increasingly bracing for the possibility of further tightening, as global tensions start to feed into costs here at home,” she said. “Westpac’s updated cash rate forecast points to more rate hikes on the horizon, reinforcing the view that even tougher times are ahead. “While further rate hikes could be just around the corner, this is not set in stone. If households and businesses wind back too far, the economy could easily stall, jobs could be at risk and the RBA could be forced to change course again.”