Q+A: Is Australia on the brink of recession?

Welcome to Fear and Greed Q&A, where we ask and answer questions about business, investing, economics, politics, and more. I'm Sean Aylmer. Yesterday, the Reserve Bank raised interest rates again with the cash rate now at 4.6%, its highest level in 15 years, and the Central Bank might not be finished yet. Inflation is still too high, and the RBA warned it could tighten further if necessary. Stephen Koukoulis is Managing Director of Market Economics. a former economic advisor to a prime minister, certainly one of our favourite economists, a former workmate of mine at the Fin Review, dare I say, the cook. Stephen, welcome back to Fear and Greed. It's great to be back, Sean. Four rate rises this year, now at 4.6%. Is it going to be enough? No.

Look, we hope so. It's not clear whether it is or it isn't. And that's the good old economist on the one hand, on the other hand. And I don't like doing that normally. But I think genuinely now, with the rate hike that we saw yesterday from the RBA, that rates are clearly restrictive. There's no way that you can say that the 4.6% cash rate, as you alluded to, a 15-year high on interest rates is anything but restrictive. Now, that begs the question, which you did ask, is that enough? Have we taken enough medicine, if you like, to ensure that the economy slows sufficiently? and in a timely enough manner, and timely enough for the RBA, that is, to see growth moderate, inflation pressures start to moderate too, and that in a not unreasonable period of time, we get inflation back to 2 point something, preferably 2.5%. So, oh, look, there are signs the economy is weakening still, and that's what gives those who want to see inflation fall soon some comfort. But for the here and now, it is still extremely high.

Michelle Bullock yesterday talked about international events and global oil prices. We know that story, but she again referred to domestic capacity constraints. Why can't we get, well, what's happening there and why can't we get it right?

There's been a change in the composition of that domestic economy, quite interestingly. You could say that a year ago, it was public demand that was really a driver of the excessive rate of growth. Federal government to some extent, but certainly the state governments with a lot of their infrastructure spend were really adding to demand for workers and materials and things like that when they were spending rapidly. And the private sector was actually quite weak. Fast forward to today, there's evidence that the public sector demand is cooling a bit. I don't want to overstate it, but it's cooling a bit. A lot of these projects are finished. A lot of the public transport infrastructure in the CBD areas have been finished and they're not being replaced with anything. And... It's been replaced by data centres and CapEx in other parts of the economy. You know, sales of EVs are booming, these sorts of things. We've got a quite different composition of where that demand resilience is. As I said, a year ago, it was probably 50-50. private and public really contributing to that growth. Now it's probably 80-20 with the private sector kicking in just when the public sector demand is