Modelling done by the Reserve Bank last September and only now released under a FOI request shows that Australia is at an 80 per cent risk of falling into a recession.

The modelling used a scenario where the interest rate would peak at 4.8 per cent, with the stated RBA goal of inflation returning to the RBA’s target of 2-3 per cent by the end of 2024.

RBA analysts calculated the likelihood of recession using three speeds, the ‘steady rise’ being a slow climb of 25 basis points rise each month before hitting 4.8 per cent in August 2023 – which appears to be where we are headed.

The Reserve Bank of Australia building is seen in Sydney, Tuesday, October 1, 2019. The Reserve Bank has cut the official interest rate to a new record low of 0.75 per cent in a bid to drive up wage growth and reduce unemployment. (AAP Image/Dan Himbrechts) NO ARCHIVING

“Like peer countries, Australia is in the midst of a historically rapid monetary policy tightening cycle in response to high inflation,” an internal email written by a Reserve Bank analyst reads.

“Stochastic simulations using the MARTIN model and the August SMP forecasts suggest that there is a one in two chance Australia ends up on the ‘narrow path’ – where inflation returns to target without requiring a recession.

“In contrast, a probit model that incorporates longer‐run historical data estimates recession risk to be much higher, at 65 to 80 per cent.”