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It has been more than 30 years since Australia experienced a \u201creal\u201d recession.<\/p>\n
The 1990-91 downturn, which pushed unemployment beyond 10 per cent and led to the collapse of many businesses, while scaring the banking sector, remains imprinted on those who lived through it.<\/p>\n
Since then, there have been two defining periods of economic turmoil.<\/p>\n
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Then-treasurer Paul Keating talking about the recession we \u201chad to have\u201d in 1990. It remains the last deep recession experienced by this country.Peter Morris<\/p>\n
Australia, famously, was just one of three developed nations to avoid a recession during the global financial crisis. So successful was the combination of government handouts, deep cuts in interest rates and an enormous stimulus unleashed by China, that tens of thousands of Australian expatriates returned to their homeland from financial centres such as New York and London.<\/p>\n
A decade later, the Morrison government shuttered the economy to protect people from a new, unknown and deadly virus \u2013 COVID. The economy contracted by 6.8 per cent in the June quarter of 2020, the single largest quarterly contraction since the depths of the Great Depression in the 1930s.<\/p>\n<\/p>\n
But huge levels of government and Reserve Bank stimulus, and the reopening of the most stringent COVID-related restrictions, meant the economy bounced back from this downturn. Many people and businesses ended the recession with more cash in their pockets than at its start.<\/p>\n
Recessions are rare and usually leave behind economic carnage, which in turn has very real human costs. It took almost 15 years for unemployment to return to its pre-1990 level, so devastating was that decade\u2019s downturn.<\/p>\n
And yet, according to a Resolve Political Monitor poll, more than one in 10 Australians believe the country is already in a recession, while 64 per cent believe it is destined to sink into one some time over the next 12 months.<\/p>\n
Related Article Just 15 per cent of those surveyed believe the country will avoid a recession. More people are unsure about the economic outlook (22 per cent) than those who think the economy will get through the next 12 months relatively unscathed.<\/p>\n The war against Iran, and what it has done to oil prices in just eight weeks, has left Australian businesses and consumers so bereft of confidence that they believe economic Armageddon is not just on the doorstep \u2013 it has crossed the threshold and is sitting in the loungeroom.<\/p>\n It\u2019s something that Treasurer Jim Chalmers touched upon during his visit last week to Washington, where discussion among treasurers, finance ministers and central bankers was dominated by the war.<\/p>\n Burnt by Donald Trump\u2019s \u201cliberation day\u201d tariff war of April last year, and the supply chain inflation unleashed at the end of the pandemic, there was an air of weariness to Chalmers\u2019 comments.<\/p>\n \u201cIt seems every time we meet we\u2019re dealing with new perils and pressures,\u201d he told the assembled ministers and bankers.<\/p>\n Related Article \u201cTwo major upheavals in two years; five in two decades; a half century now bookended by major oil shocks.\u201d<\/p>\n Chalmers is a regular at the International Monetary Fund meetings that are held in the northern hemisphere spring every year. At each of these gatherings, the fund releases its best guess at how the global economy will perform over the coming 12 to 24 months.<\/p>\n But the uncertainty caused by the war is so high that even the IMF has struggled to get a handle on its impact. It offered three scenarios, ranging from a mild downturn to a global recession that would be dominated by high inflation and high unemployment.<\/p>\n If some of the world\u2019s best economists are unsure about what the future holds, pity shoppers and business owners.<\/p>\n Little wonder consumer and corporate confidence has nosedived, and many believe the country is about to slam into an economic disaster.<\/p>\n The economic reality is that just before the Iran war, the economy was growing at a three-year high of 2.6 per cent, while the jobless rate was sitting at 4.3 per cent. That\u2019s nothing close to a recession.<\/p>\n But the other key indicator of an economy\u2019s performance, inflation, had clearly stepped up, reaching 3.7 per cent. And when the next monthly inflation report is released next week, the first report that will cover the time since the war started, it will have climbed much higher.<\/p>\n Petrol, the single largest weekly expense for most Australians, shot up 47 per cent through March. The national average price grew from $1.71 a litre to $2.53. It\u2019s been worse for diesel users, as prices rose 76 per cent to an eye-watering $3.19 a litre.<\/p>\n For those who prefer to fly rather than drive, Qantas and Virgin added fuel surcharges to their tickets as the cost of aviation fuel almost doubled.<\/p>\n And when transport costs go up, so does just about everything else.<\/p>\n The world\u2019s largest condom manufacturer, Malaysia-based Karex Bhd, said it could have to push up its prices by between 20 and 30 per cent because of higher shipping costs and hits to the goods it needs to make brands such as Durex and Trojan.<\/p>\n Related Article This week, Coles revealed it was pushing up the price of its brand of milk by 20\u00a2 on a one-litre bottle to help cover extra payments to dairy farmers and the price hikes on transport and packaging.<\/p>\n From a trip to the corner shop for milk to go on Corn Flakes, to a roll in the hay, the cost of living is climbing rapidly. And that means many Australians believe this demonstrates we are already in a recession, even if official figures say we aren\u2019t.<\/p>\n Which makes it all the more complicated for Chalmers and Finance Minister Katy Gallagher as they prepare what is one of the most important budgets this century.<\/p>\n Expectations around the May 12 document have been elevated ever since last year\u2019s emphatic election victory. With the government holding a large majority in the House of Representatives, and options to pass contentious laws through the Senate, the politics of a reforming budget are the clearest since Joe Hockey\u2019s disastrous 2014 version.<\/p>\n Years of economic underperformance under both sides of politics, plus the financial headwinds noted by Chalmers, have added to the economic case for major change.<\/p>\n This was amplified by last August\u2019s economic roundtable and the completion of five major research projects by the Productivity Commission into everything from company tax to the aged care sector.<\/p>\n In a major scene-setting speech delivered in Melbourne in late March, Chalmers confirmed the budget would have three major packages covering spending cuts, productivity-enhancing reforms and tax.<\/p>\n Discussions of a change to the capital gains tax concession, which Albanese could have shut down at any turn, have been left to run.<\/p>\n Some treasurers and prime ministers, faced with the turmoil unleashed by the Iran war, may have tempered expectations, declaring now is not the time for change.<\/p>\n But the government has ploughed on.<\/p>\n At the meeting in Washington, Chalmers said he was doubling down.<\/p>\n \u201cThe perils and pressures of 2026 are no reason to park the hard but necessary reforms to make our budgets more sustainable and our economies more productive,\u201d he said.<\/p>\n \u201cThe economic fallout from this war is no excuse to turn inwards.\u201d<\/p>\n They are brave words. But as proven by Joe Hockey, who used his 2014 budget speech to draw a line between \u201clifters and leaners\u201d, words need to be backed by action.<\/p>\n AMP chief economist Shane Oliver reckons that to alleviate inflationary pressures in the economy and make the budget more sustainable, Chalmers has to consider spending cuts equating to a cumulative $102 billion over the next four years.<\/p>\n Not even Hockey\u2019s 2014 budget announced such a large cut. His was a \u201cmodest\u201d $29 billion, although bigger cuts in education and health were pushed to unsuspecting states and territories.<\/p>\n \u201cThis would require cuts to the NDIS, more aggressive cuts to the public service and more means testing of welfare,\u201d Oliver said.<\/p>\n![\"A](\"https:\/\/www.newsbeep.com\/au\/wp-content\/uploads\/2026\/04\/1776051613_486_f59f4ef8b17eb5dceb6eba8594fd21913d7fae06.jpeg\")
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Milk prices are going up as freight costs rise due to the war in Iran.Bloomberg<\/p>\n![\"Treasurer](\"https:\/\/www.newsbeep.com\/au\/wp-content\/uploads\/2026\/04\/640ba12fc42e13077d7c458e3f86605750170893.jpeg\")
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Jim Chalmers before meetings in Washington last week to discuss the deteriorating global economic outlook.X<\/p>\n
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