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Australian economy back to pre-COVID levels by 2021

  • January 07 2021
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Invest

Australian economy back to pre-COVID levels by 2021

By Cameron Micallef
January 07 2021

The Australian economy is expected to bounce back to pre-COVID levels by the end of 2021 as wins on the health front and aggressive government policy have limited damage while boosting business and consumer confidence, an industry expert has revealed.

Australian economy back to pre-COVID levels by 2021

Australian economy back to pre-COVID levels by 2021

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  • January 07 2021
  • Share

The Australian economy is expected to bounce back to pre-COVID levels by the end of 2021 as wins on the health front and aggressive government policy have limited damage while boosting business and consumer confidence, an industry expert has revealed.

Australian economy back to pre-COVID levels by 2021

While being buoyed by overall prospects of the Australian economy Janus Henderson Investors’ Australian fixed-interest investment strategist Frank Uhlenbruch said new outbreaks of COVID in Sydney and Melbourne and Australia’s relationship with China show Australia is not completely out of the woods. 

“We still look for the Australian economy to rebound by around 5 per cent over 2021, though the latest outbreaks and reintroduction of state border controls have increased downside risks,” Mr Uhlenburch predicted. 

“While a 5 per cent growth rate looks very high, we don’t expect the economy to reach the end of 2019 levels until late 2021.

Mr Uhlenbruch added that the fund manager expected the economy to reach end-2019 levels in late 2021, as the “slack” built up in terms of unemployment and wage suppression would take a number of months to recoup.

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“The economy will have built up considerable slack and this will continue to show up in an elevated unemployment rate, low rate of wages growth and inflation rate below the RBA’s 2 -3 per cent target band,” he said.

“With the cash rate now at 0.10 per cent and the RBA reluctant to move into a negative rate regime, further easing, if needed, is likely to come in quantitative form.”

Mr Uhlenbruch told investors that historically low-interest rates will persist for the next couple of years driving demand for income-producing assets.

“The preconditions for a shift in accommodative policy remain ‘outcome’ based. Fiscal policy will move from accommodation to consolidation only when the unemployment rate falls below 6 per cent,” he explained. 

“Monetary conditions will only normalise (first tightening in a new cycle) when actual inflation is sustainably in the 2 -3 per cent RBA target band and the labour market is at full employment. We do not see these outcomes being achieved over the next couple of years.”

Australian economy back to pre-COVID levels by 2021
Australian economy back to pre-COVID levels by 2021
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About the author

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Cameron is a journalist for Momentum Media's nestegg and Smart Property Investment. He enjoys giving Aussies practical financial tips and tricks to help grow their wealth and achieve financial independence. As a self-confessed finance nerd, Cameron enjoys chatting with industry experts and commentators to leverage their insights to grow your portfolio.

About the author

Cameron is a journalist for Momentum Media's nestegg and Smart Property Investment. He enjoys giving Aussies practical financial tips and tricks to help grow their wealth and achieve financial independence. As a self-confessed finance nerd, Cameron enjoys chatting with industry experts and commentators to leverage their insights to grow your portfolio.

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