As the Covid-19 tide gradually turns a corner towards recovery, Deloitte Access Economics has taken stock of Australia’s economy – forecasting a much brighter 2021 than originally feared.
Australia’s vaccine rollout starts next month, adding an extra safety net to a country where infection containment has been remarkably effective – particularly in global context. The upshot is that 2021 rings in with a note of optimism.
“Australia is one of just five nations – Taiwan, China, Vietnam, New Zealand and ourselves – who enter 2021 very well-placed. Covid-19 numbers are very low, the vaccine news is excellent, confidence is rebounding, there are heartening developments in job markets, and China’s trade war with Australia has – so far at least – actually added to national income rather than hurt it,” noted Chris Richardson, partner at DeloitteAccess Economics.
This is a change of tune for Richardson and Deloitte Access Economics. Midway through 2020, he was lamenting the tentative economy in Australia at a time when cases were worryingly on the rise again. At the time, the economic cost of a second wave was pegged ata devastating $100 billion.
Many factors were driving the contraction. Spending has been at a marked low amid a recession, which was also keeping investment at a minimum. Trade and supply chains were hindered, while migrant population – positioned as a key driver of Australia’s future economic growth – had all but dried up. A vicious cycle: billions in job and income losseswere making matters worse, which in turn cost more jobs.
Today, each of these economic fundamentals looks to be on the mend. Per Deloitte Access Economics’ growth outlook for 2021, around 300,000 people will return to the labour force this year, with over 400,000 job additions expected by the end of next year. Unemployment will steadily dip, dropping below 6% by 2023.
Setting off the dominoes: more employment will boost household spending and business investment, while the vaccination will set the imports and exports back in motion. By the end of this year, the researchers expect Australia’s GDP to grow by more than 4%.