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PM hopes worst inflation is over, but questions linger over recession

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Prime Minister Anthony Albanese is hopeful the worst of Australia's rising inflation has passed.

Since 2020, inflation has jumped from 0.85 per cent to hit 7.3 per cent, escalating especially rapidly over the past 12 months.

Some economists last year were predicting Australia could top out at 8 per cent, and new figures due out on Wednesday may indicate how accurate those forecasts are.

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Many household budgets have been stretched by a confluence of challenging factors, including mortgage rate increases, spiking energy bills and a cost of living crisis.

Speaking on Today, Albanese said the federal treasury had modelled for inflation to peak "around about this time or in the first quarter of this year".

"We certainly hope that (inflation) has peaked," he said.

"The whole world has been impacted by the Russian invasion of Ukraine, and we are not immune to it."

Albanese did not explicitly say Australia whether would avoid slipping into a recession.

"I think our economy still has very strong fundamentals," he said.

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He described the world economy as "volatile", admitting that "we are exposed to a lot of those global issues, but the fundamentals here in Australia are still very strong."

Albanese hailed Australia's low unemployment rate of 3.5 per cent.

Last week the World Bank warned the global economy will come "perilously close" to a recession this year, led by weaker growth in all the world's top economies – the US, Europe and China.

The bank slashed its forecast for global growth this year by nearly half, to just 1.7 per cent, from its previous projection of 3 per cent.

If that forecast proves accurate, it would be the third-weakest annual expansion in three decades, behind only the deep recessions that resulted from the 2008 global financial crisis and the coronavirus pandemic in 2020.

The next Reserve Bank decision on interest rates is scheduled for February 7, where borrowers could face a ninth successive increase.

The central bank is using hikes to try and rein in inflation.

"We are very conscious of the pressure that is on people's cost of living at the moment," Albanese said.

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