Predictions for 2024

Happy New Year!

Part of the fun of a new year is trying to predict how things will go, even through predicting things 12 months out is fraught with danger. So here’s a few small predictions for 2024:

🔮 We won't see a rate cut in 2024
Through the end of 2023, markets strongly pivoted to anticipating interest rates will begin to fall next year. I don't see that happening (either here or in the USA). Recent progress on headline inflation has been driven by a strong services inflation being offset by significant goods disinflation. The goods disinflation cycle is coming to an end and given the strength and general optimism in our economy, I don't see services inflation easing enough to see inflation appreciably fall through 2024. Rates will end the year where they started it, with further increases more likely than cuts through 2024.

🔮 Insolvencies will rise (but not that much)
Corporate insolvencies were up across the second half of 2023, slightly eclipsing the long term average in raw terms. However, they remain near all time lows on a per-company basis. With the ATO increasingly serious about collecting its debt book, and a large number of 'zombie' companies still trading with COVID debt hangovers, 2024 will see corporate insolvencies grow, but probably not to record levels. The strong economy and solid trading conditions are likely to persist through 2024, keeping plenty of businesses teetering rather than falling over. 

🔮 Unemployement will rise
Unemployment will continue to creep up in 2024, ending the year in the 4.5% to 5.0%. However, this will be driven not by people losing their jobs, but by the pool of workers growing through continued strong immigration. I expect the economy to remain strong and continue to generate jobs, just not enough to keep up with the influx of new people.

🔮 Wage growth will be a problem 
A combination of continued skill shortages in a range of key industries, and some misguided IR reforms by the current government will lead to continued upward pressure on wages, which will continue to drive services inflation. We’ve already seen some outsized pay deals, and each success will only encourage other to chase bigger raises.

🔮 We won't have a recession
There's near zero chance of a recession in 2024, absent some kind of unforeseen disaster or a wild pivot by the RBA. The economy is still far too strong and there's too much latent demand stashed away by households for the economy to really roll over.