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Australian economy to bounce back ‘faster and stronger’
The Australian economic recovery is going to be faster and stronger than economists previously expected, a big four bank has said.
Australian economy to bounce back ‘faster and stronger’
The Australian economic recovery is going to be faster and stronger than economists previously expected, a big four bank has said.
Commonwealth Bank’s head of Australian economics, Gareth Aird, has updated his predictions for the national economy, which is now expected that GDP will contract by 3.3 per cent in 2020 but will have a stronger recovery in 2021.
Over the next two years, GDP is predicted to grow by 4.2 per cent in 2021 (previously 2.5 per cent) and another 3.8 per cent in 2022.
“When GDP and employment collapsed in Australia over Q2 20, comparisons were made with the Great Depression,” he said.
"We had not seen such a sharp deterioration in economic data since the 1930s. But the similarities between the Great Depression and the COVID-19 pandemic from an economic perspective only pertain to the Q2 20 activity data.”
While highlighting the drop is similar to the 1930s, Mr Aird points to the huge monetary and fiscal support injections that did not occur during the Great Depression.
“The government’s fiscal support packages were designed to keep as much of the economic furniture intact so that when restrictions were eased, activity could rebound swiftly,” Mr Aird said.
“It is clear that the economic data at the national level has improved since the middle of the year. Indeed, we expect a decent bounce in GDP over the second half of this year to show up in the Q3 20 and Q4 20 national accounts.”
Mr Aird said he was “optimistic” about the strength and duration of the economic recovery and said there was plenty of evidence creeping into the data that signals strong outcomes next year are more likely than not.
“Provided transmission of COVID-19 in Australia remains low, particularly community transmission, the strength of the economic recovery in 2021 will surprise many.
“We believe the metaphorical ‘bridge’ has been built very well and sets Australia up for a prosperous next two years,” Mr Aird concluded.
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