2023 has been an extraordinary year in that we've had the most significant monetary tightening that we've seen since the early 1980s but so far the global economy has held up okay. Global growth as we come to the end of the year is a little bit below average but there's been a really big divergence between the major economies. Europe is tipping into recession, China has been soft although it's stabilized. But in particular the US has outperformed.
So as we go into 2024, my expectation is that it will continue to gradually slow, but given what we've seen in the US, there's a lot of uncertainty around that. So monetary policy works with long and variable lags, and particularly in the United States where most people have a 30-year fixed mortgage. The direct impact or the cash channel as we talk in economics is actually pretty weak so it always takes a long time and because interest rates were so low most people have very low mortgage rates and it's only when you buy a new house that you have to refinance.
So what we're seeing is not that atypical but it does mean that the flow through the economy is slower than a lot of people had expected. So the bond market has been really interesting again in that at the beginning of the year a lot of people thought there'd be a US recession and they thought that yields would come back down and that central banks would be cutting interest rates by now. But because the US has held up really well, there's been a reassessment and long yields have moved higher as people have started to think that maybe equilibrium interest rates are higher.
The 10-year yield tried to go through 5%. It's actually bounced off that in the last month. But what happens next will be very much driven by growth.
If we're right and the US has a mild recession, yields will probably fall from here next year. But if we're wrong and the US turns out to be resilient again, my guess is 10-year yields will try and take out 5% again. China again is really tricky in that what you're really talking about is you're talking about a political economy and a lot of what you're forecasting is what the government's going to do. So far they've turned up the stimulus tap a little bit, growth has stabilised but they've also been quite prepared to live with a weak housing market as they try and deleverage that important sector.
My guess is that they turn it up a bit more and that growth stabilises and moves a little bit higher next year. but I think it's very unlikely they go back to the bazooka that they've used in previous cycles. So Europe has been the weakest of the major economies and unfortunately I suspect that will continue into 2024. It's been stagnating for about a year now but as monetary tightening sees interest rates that consumers actually pay continue to drift higher, I think it'll stay under pressure.
So I think it will be weak. well into the second half of next year. So the Australian economy is kind of halfway between Europe and the United States. It's been more resilient than some people had feared, but it does look like there are cracks starting to appear.
Consumption's been quite soft, and in particular consumption per capita has been falling. So what that really means is that the overall economy's been held up by really rapid population growth, but as monetary tightening continues and particularly as population growth now slows I think that overall GDP growth will slow as well so I think it's a 50-50 call as to whether there's a recession in Australia but it is going to be softer next year than we've seen in the last six months. I think it's clear that inflation has peaked in Australia but it's interesting again in that inflation followed the rest of the world up so it lagged and I think it's going to lag on the way down as well so the labour market is still very tight wages growth has picked up So I think it's going to take some time before inflation goes back to the central bank's target. Having said that, I think the peak is already in. So 2024 is going to be a very uncertain year again.
I think the most likely thing is that global growth slows some more into the beginning of the year. But with inflation having come back down, I think by the middle of the year, central banks will be easing policy. And I think that means that growth will stabilise in the second half of the year.
And I do think that we look forward to a much better year in 2025.