Why Australia Is Unlikely to Fall into Recession (And Why That Matters for Property Investors)

You’ve probably noticed the headlines predicting doom and gloom — again.

Recession whispers are growing louder, with interest rate falls, global uncertainty, and consumer stress dominating the news.

But are we really headed for a recession here in Australia?

According to Shane Oliver, Chief Economist at AMP, the answer is a reassuring no.

And I tend to agree.

Let’s unpack why Australia is likely to dodge a recession bullet — and what that means for savvy property investors.

First, What Even Counts as a Recession?

There’s a bit of confusion out there.

The traditional definition of two consecutive quarters of negative economic growth is widely quoted.

But the RBA and Treasury use a broader lens.

They look for sustained weakness across several indicators: GDP, jobs, income, and spending.

That’s important.

It means a short-lived dip doesn’t necessarily qualify as a recession — especially if unemployment stays low and the economy bounces back.

So, Are We in Trouble? Not Exactly.

We’ve definitely seen the economy slow down.

GDP growth was weak over the last few years, and it’s likely to remain sluggish over the next few months.

But here’s the thing — this is more of a “slow patch” than a full-blown recession.

As Shane Oliver puts it, "it's a per capita recession, but not a recession in the traditional sense."

A per capita recession occurs when economic output (GDP) per person declines, meaning there is less economic activity available for each individual.

 This is different from a traditional recession, which focuses on overall economic growth.

The 7 Reasons Australia Will Likely Avoid a Recession

Here are 7 solid reasons why we’re not heading into a full-scale downturn that I think they make a compelling case:

1. Australia has been resilient in recent decades

The old saying used to be that “when the US catches a cold Australia catches the flu”.

In other words, US economic downturns lead to even bigger downturns in Australia.

However OLiver points out that while Australia certainly experienced deep recessions in concert with the US in the early 1980s and 1990s, apart from the pandemic – which does not really count as it was due to health orders to stay at home – this has not been the case in recent decades.

Australia avoided recession in both the tech wreck and Global Financial Crisis.

2. The global economy should avoid recession

Oliver explains that the , the US is at high risk of recession, but global growth is more likely to slow than go into recession.

This means the second-round effect of weaker global growth on our exports, while significant at maybe 0.5% of GDP over a year, is unlikely to be devastating.

He explains:

The US is most at risk because it has threatened virtually all of its trade whereas other countries are only seeing their trade with the US impacted.

Given Trump’s ongoing policy chaos and the associated uncertainty which is hitting US confidence and decisions to spend and invest along with supply chain disruptions, the risk of a US recession is high at around 45% with 1% to 1.5% likely to be knocked of US growth.

3. Only 5% of our exports go to the US

The 10% US tariff on our exports is bad news for industries affected and there is likely more to come for pharmaceuticals (worth $2bn a year).

However, only 5% of Australian exports go to the US. Oliver explains:

This is worth less than 0.9% of our GDP and much of this will still continue, albeit the tariffed goods will now more expensive in the US.

What’s more much of it is fungible such as the $3.6bn in gold exports and $6.1bn in beef and should be able to find other markets.

So, all up the direct hit to GDP growth is probably only 0.1% at most.

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4. A lower $A will provide a shock absorber

Oliver explains:

A plunge in the value of the Australian dollar partly explains why Australia was protected from the tech wreck, the GFC (the $A fell 39% at the time) and the pandemic (when it fell 19%) and the same is likely to apply this time.

Since its high last September to its recent low as share markets plunged, the $A has fallen about 14% against the $US, reflecting fears about the outlook for global growth and commodity demand.

This helps support the Australian economy by making Australian exports relatively cheaper (offsetting the impact of the tariffs) and boosting the Australian dollar value of commodities when their US dollar value is falling.

5. The RBA has plenty of scope to cut rates

If Australia's economy runs into trouble, unlike going into the pandemic when the cash rate was just 0.75% the RBA has plenty of scope to cut this time around as the cash rate is at 4.1%.

 6. Election promises point to easing fiscal policy

Oliver believes that with the Federal election now less than three weeks away Australians are being bombarded with spending and tax break commitments from both sides of politics.

The spendathon is bad economics, but points to a further easing in fiscal policy imparting a modest stimulus for the economy.

7. Trump may be getting a bit “yippy”

Oliver says:

"The past week has seen Trump blink in the face of the market mayhem he was causing and the backlash from American consumers and businesses.

The justification for the tariffs was always hard to pin down precisely with talk of: “escalating to de-escalate” as part of a negotiation to get better trade deals; retaliation for foes and allies “ripping us off”; border control and drugs; annoyance at other countries various regulations and value added taxes; to raise revenue with an “External Revenue Service” to pay for income tax cuts; to bring production back to the US to usher in a new golden age; as part of a “detox” for the economy; and with some concluding it’s all part of a strategy to cause a recession and lower interest rates so US debt could be refinanced at lower rates.

And the formula used to drive the reciprocal tariffs (trade deficit with country divided by imports from that country) made no economic sense."

Some other factors

1. Population Growth Is a Major Buffer

With near record levels of immigration, our population keeps growing faster than almost every other developed nation

More people = more demand for housing, goods, and services.

It’s not the whole answer, but it certainly helps prop up aggregate GDP and consumption.

2. Strong Labour Market

Unemployment is hovering around 4.1%, and job vacancies remain high.

Sure, we’re seeing some softening, but this is still an incredibly tight labour market.

That alone keeps money flowing through the economy and staves off a dramatic pullback in household spending.

3. Inflation Is Cooling

This one’s crucial. Headline inflation is falling, and underlying (core) inflation is tracking lower too.

That means we’re going to see lower interest rates which would be a welcome relief for borrowers and investors alike.

4. Fiscal Policy Is Still Supportive

The federal government is not splashing cash like it did during COVID, it hasn’t slammed on the brakes either.

Infrastructure spending and energy rebates are providing targeted stimulus.

What This Means for Property Investors

This is where I think it gets interesting.

In times like these, the media noise gets louder, and many investors retreat to the sidelines.

But history tells us that opportunity often arises when others are fearful.

If we avoid a recession — and it looks like we will — that means:

✅ Employment will remain strong
✅ Migration-driven demand will keep rising
✅ Interest rates will keep falling throughout 2025
✅ The current soft patches in the property market may present a rare countercyclical entry point

In other words, this could be a prime time to act strategically.

Final Thoughts

Shane Oliver’s analysis is a welcome dose of reason in a market dominated by fear and misinformation.

Yes, the economy is slowing.

Yes, there are headwinds. But no — we’re not falling off a cliff.

For property investors who understand the bigger picture, this is a time to stay the course.

Or better yet, make your move while others hesitate.

Because as I often say: Don’t wait to buy property. Buy property and wait — especially when the fundamentals are quietly lining up in your favour.