Peter Martin | The Conversation surveys leading Australian economists on likely conditions ahead

The official quarterly measure of inflation peaked at 7.8 per cent in the year to December and is now 7 per cent, and the newer monthly measure peaked at 8.4 per cent and is now 5.6 per cent.

What's at issue is how quickly inflation will continue to fall, how many more times the Reserve Bank will push up interest rates to make sure it falls, and the damage those rate hikes will do to an already very-weak economy.

Twelve of the 27 think a recession is as likely or more likely than not, and almost all expect a "per-capita recession" in which economic growth fails to keep pace with population growth, sending living standards backwards.

Now in its fifth year, The Conversation survey draws on the expertise of leading forecasters in 25 Australian universities, think tanks and financial institutions; among them economic modellers, former Treasury, International Monetary Fund and Reserve Bank officials, and a former member of the Reserve Bank board.

After 12 interest rate hikes that lifted the Reserve Bank's cash rate from 0.1 per cent to 4.1 per cent in a little over a year, the panel expects just two more.

The panel predicts a cash rate of 4.5 per cent by the end of this year, followed by a decline to 4.3 per cent by the middle of next year, and to 3.9 per cent by the end of 2024.

Asked to specify the month in which the cash rate will peak and how high, the panel settled on a peak of 4.7 per cent in November.

A cash rate of 4.7 per cent would lift the typical interest rate on a new mortgage from 5.4 per cent to 6 per cent, adding a further $200 per month to the cost of servicing a $600,000 mortgage.

But the extra pain would be short-lived. Asked how long the cash rate would stay at its peak before being cut, the panel's average guess was six months, meaning rates would begin to fall in June.

Several of those surveyed cautioned against expecting rates to ever fall back to anything like the emergency lows of 2020 and 2021. Others noted that the one thing that could force the Reserve Bank to cut rates faster than planned was a recession.

The panel expects inflation to slide from 7 per cent to 5.2 per cent by the end of the year, then to 3.9 per cent by mid-2024, and to 2.9 per cent a year later - back within the Reserve Bank's 2-3 per cent target band.

Although steep, the fall in inflation isn't as fast as predicted by the Reserve Bank (3.6 per cent by mid-2024) or the Treasury (3.25 per cent by mid-2024).

Barrenjoey chief economist Jo Masters said while increases in the prices of imported goods and fuel were slowing, inflation was increasingly being driven by the prices of services such as rents that tended to be sticky and persistent.

Margaret McKenzie of Federation University identified the reopening of the economy to migrants as a source of downward pressure on prices, saying it would ease labour shortages.

Moody's Analytics' Harry Murphy Cruise said although slowing spending was helping to bring down inflation, the Reserve Bank seemed unwilling to let things take their course and wanted to slow inflation more quickly, risking "knocking the wind out of" an already-fragile economy.

A welcome upside of much lower inflation is a forecast of the first increase in real wages in three years, albeit a small one.

The panel expects wages growth of 4 per cent in the financial year ahead, just beating prices growth of 3.9 per cent. The resulting 0.1 per cent increase in so-called real wages would be followed by a more substantial increase of 0.7 per cent in 2024-25 as wages growth of 3.6 per cent tops prices growth of 2.9 per cent.

New Zealand is already in a recession, and the panel assigns a 59 per cent and a 42 per cent probability to a recession in the United Kingdom and the United States, with the most likely start for both being the last three months of this year.

Throughout 2023 the panel expects economic growth of just 1.2 per cent in the United States and historically weak growth of 4.9 per cent in China, suggesting the biggest customer for Australian resources will be unable to help much as Australia's economic growth dwindles.

The panel is forecasting economic growth of just 1.2 per cent in 2023 - the lowest growth rate Australia has recorded outside a recession in more than 30 years - climbing to a still-low 1.5 per cent in the year to June 2024 and 2.3 per cent in the year to June 2025.

AMP chief economist Shane Oliver says if the low growth rate turns into what is usually called a recession (two consecutive quarters of shrinking gross domestic product) it will be because the Reserve Bank has taken interest rates into highly-restrictive territory given high household debt levels.

Consumer spending is almost certain to shrink as debt servicing hits a record high as a share of income and, on the Bank's own analysis, 15 per cent of households with a variable rate mortgage - 1 million people - become cash flow negative.

Asked the chance of the Australian economy going into recession in the next two years, the panel's average answer was 38 per cent, well up from the 26 per cent probability the panel assigned to a recession in February.

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KPMG chief economist Brendan Rynne assigned a 100 per cent probability to what he called a "shallow, extended recession" where growth was weighed down by a downturn in housing investment this year followed by a slowdown in business investment towards the end of the year and into 2024.

The average forecast start date of a recession, should there be one, is the December quarter of this year - the final three months of this year.

The panel's economic growth forecast of 1.5 per cent for 2023-24 is well below the Treasury's forecast of population growth of 2 per cent, suggesting output per person will shrink in what is called a per-capita recession.

The panel expects a gradual increase in the unemployment rate from its present near-50-year low of 3.6 per cent to 4.3 per cent by mid-next year, followed by an increase to 4.6 per cent by mid-2025.

The forecasts are in line with those of the Treasury and Reserve Bank and suggest Australia is unlikely to surrender the big gains made in the aftermath of the COVID lockdowns and return to the pre-COVID unemployment rate of 5 per cent.

University of Tasmania economist Mala Raghavan said while job markets would become less tight, especially as foreign students and migrants returned, the impact would be felt first in the underemployment rate, which reflects the extent to which workers are working fewer hours than they want.

The panel expects growth in real household spending of just 1.5 per cent in the year to June, meaning the amount of goods and services bought per household is likely to shrink.

Yet at the same time, it is forecasting continued (modest) growth in home prices which climbed for the third month in a row in May after falling since mid-2022.

Most of the panel expects some growth in Sydney and Melbourne home prices in the year to June 2024, with only four panel members predicting declines. The average forecast is for Sydney prices to climb 2 per cent and Melbourne prices 2 per cent.

Former Productivity Commission economist Jenny Gordon identified renewed migration as a driver of demand, offset by declining real wages and the risk of a recession.

Jo Masters said sellers appeared to be withdrawing supply, with total listings a third lower than normal, while the buyers appeared to have higher incomes than before and lower debt-to-income ratios, meaning they were less troubled by higher interest rates.

On balance, the panel expects a tiny budget deficit of just $11.4 billion in 2023-24, somewhat less than the forecast in the May budget, and just 0.4 per cent of GDP.

In part that is because it expects the iron ore price to stay near US$104 per ounce by the end of the year instead of falling towards the budget forecast of US$60.

They expect modest share market growth of 3 per cent in the year to June 2024, with the results sensitive to home prices (through the profits of financial corporations) and minerals prices (through the profits of mining companies).