Another interest rate rise will tip Australia into a recession we don’t have to have

April 16, 2026 — 3:00am

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After a gradual recovery from the substantial fall in real incomes and the rapid increases in interest rates during the three years following the end of the COVID-19 pandemic, the Australian economy now appears to be in the early stages of another, potentially significant downturn.

Although there is as yet little hard statistical evidence to confirm that, this week’s news of plummeting consumer and business confidence provides an ominous signal.

The Westpac-Melbourne Institute index of consumer sentiment dropped 12.5 per cent in April, the largest single-month decline since April 2020, immediately after the onset of the pandemic, to its lowest level since September 2023, just after the 12th of what would ultimately be 13 increases in the RBA’s official cash rate, and only 4.5 points above that April 2020 level, which was in turn the lowest since the recession of the early 1990s.

Almost certainly, the fall in consumer confidence is in response to the sharp increase in petrol and diesel prices and apprehension at the possibility of fuel shortages.

Perhaps surprisingly, consumer confidence fell by more among people who own their homes outright and among renters than among people with mortgages – suggesting, possibly, that people are more worried about falling house prices than about higher interest rates. Also surprisingly, there was a much larger drop in confidence among people earning over $100,000 a year than among lower-income earners........

© WA Today