Investment firm Goldman Sachs has revised its outlook for Australian economic growth.

When I say “revised”, it’s rejigged the numbers to what economists like to call the “downside”.

The investment bank sees demand in the economy falling further.

“More recently, house price growth has also eased and April’s large drop in business forward orders highlights a non-negligible risk of an outright contraction in domestic demand,” Goldman economists led by Andrew Boak said in a research note.

Earlier this week Macquarie said the big demand pillars in the economy like business investment, government spending and the export sector would not be strong enough to counter the reduction in demand from lower levels in migration.

So… it slapped a 50:50 probably of Australia entering a technical recession this calendar year.

A recession is considered by many to be two consecutive negative quarters of economic growth.

Goldman Sachs isn’t going so far as to forecast a 2024 Australian recession, however its forecast for domestic demand, combined with the NAB’s forecast of export sector weakness later this year, is a little concerning – the two combined could produce a recession.

Importantly, Goldman Sachs also sees unemployment rising to 4.6 per cent, up from the current 4.1 per cent (April) as reported by the ABS.

“… the lagged impact of sub-trend growth is likely to weigh on the labour market over 2024 and there is growing evidence of labour supply outstripping labour demand,” Andrew Boak wrote.

“Consistent with this, the unemployment rate rose +19bp in April to 4.1% and our forecast rise to 4.6% by end-2024 lies at the optimistic side of a broad sweep of softening lead indicators.”

So, what does all this mean for interest rates?

“Looking ahead, we expect the RBA will remain data dependent and will want to keep all options on the table.”

“Our base case is for the RBA to start easing in November 2024 (-25bps) following softer inflation data over the coming quarters, an ongoing cooling in the labour market and the likelihood of easing cycles across key G10 peers.”

The message now from Macquarie Group, NAB and Goldman Sachs is that demand is falling materially, and there’s a heightened risk of the economy contracting in the March quarter. The ABS will publish the National Accounts for the March quarter on June 5.

The thinking is that tax cuts, government rebates, and rising real incomes in the second half of the year will pull shoppers out of the mire.

Here’s hoping.