Treasurer Jim Chalmers is confident that Australia will not experience a recession, despite concerns from some economists about the challenges presented by rising inflation. Chalmers acknowledges that the Australian economy may slow down as interest rates increase, but neither the Reserve Bank nor Treasury are predicting a recession. He attributes the anticipated slowdown to the interest rate hikes that began before the election and the global economic slowdown. Chalmers praises the outperformance of the Australian labor market compared to its international counterparts, which puts the nation in a strong position to withstand economic challenges. Reserve Bank Governor Philip Lowe also believes that Australia is on track to return inflation to its target range while maintaining a growing economy, although he acknowledges significant risks to achieving this goal. Economists like HSBC’s Paul Bloxham are growing concerned about a possible recession in Australia, citing the risk of high inflation embedded in the system due to the rising cost of living and resulting wage demands. However, analysis by St George economists suggests that goods inflation will ease as wholesalers start discounting excess stock, potentially alleviating pressure on the Reserve Bank’s interest rate tightening cycle. The abundance of inventories and softer consumer demand are expected to drive greater-than-usual discounting. The economist also points out that high industrial property rents contribute to the need to unload stock. The discounting is expected to accelerate the disinflationary process already underway in goods prices. Meanwhile, the importance of services in combating high inflation is highlighted.