Some economists are warning we’re heading for an unnecessary recession.

Economists at the consultancy firm Deloitte are warning of a potential recession should the Reserve Bank keep hiking interest rates.

Australian consumers surprised everyone with their continued appetite to spend all through last year despite the official cash rate jumping from 0.1 percent to 3.1 percent and inflation rocketing to its highest level since the early 1990s. Retail spending held up remarkably well.

But the economists at Deloitte believe consumers are about to run out of steam, saying there are already signs that households are feeling the pinch from falling house prices, higher mortgage repayments and expenses like rent, petrol and groceries getting ever more expensive.

Something which economists are watching closely is how well households cope with fixed rate mortgages expiring this year.

Several hundred thousand fixed rate mortgages will roll off – meaning borrowers will need to take out new mortgages at higher rates on average moving from a home loan rate of around 2 percent to 6 percent.

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Australia’s Reserve Bank could trigger a recession, warns a new report by consulting firm Deloitte. According to the report, the Reserve Bank’s decision to cut interest rates to a record low last month could have a negative impact on the economy.

The report, which was released on Monday, states that the Reserve Bank’s decision to cut the cash rate by 25 basis points to 0.75% could lead to a “self-fulfilling prophecy” of weak economic growth.

Deloitte’s report also warns that the Reserve Bank may not have enough firepower to counter a recession, as it has already cut interest rates to near zero and may lack the tools needed to stimulate the economy in the event of a downturn.

This warning comes amidst growing concerns about the global economy, including the trade war between the United States and China, Brexit, and other geopolitical risks.

Furthermore, the Australian economy has been facing significant challenges of its own, including a slowdown in consumer spending, falling house prices, and weak business investment.

Deloitte’s report urges the Reserve Bank to take a more strategic approach to monetary policy, including measures to support the banking sector and encourage investment in infrastructure.

Specifically, the report recommends that the government increase public investment in infrastructure and that the Reserve Bank introduce policies that support the growth of small and medium-sized businesses, which are seen as a key driver of job creation and economic growth.

Overall, Deloitte’s report highlights the need for Australia’s policymakers to take action to mitigate the risks of a recession, and to take a long-term view of the country’s economic prospects.