A little ray of sunshine as 2021 economic survey points to brighter times ahead

Peter MartinVisiting Fellow, Crawford School of Public Policy, Australian National University Suddenly, economic forecasters are optimistic. Six months ago the forecasting team assembled by The Conversation was expecting Australia’s recession to continue into 2021, sending the economy backwards a further 4.6% throughout the year. This morning, in the survey prepared ahead of the Reserve Bank board’s first meeting for the year and an address by the Reserve Bank governor to the National Press Club on Wednesday, the same forecasting team is upbeat. It expects the recovery that began in the September quarter of last year to continue, propelling the economy forward by a larger than normal 3.2% throughout 2021, with growth slowing to more sedate 2.1% per year by the middle of the decade, still well above than dismal 1.7% per year expected six months ago. The unemployment rate is now expected to remain near its present 6.6% throughout 2021, instead of soaring to almost 10% as expected six months ago. But improvement in the unemployment rate is expected to be slow, and as house prices and share market prices climb, most of the panel expect the Reserve Bank to lose its patience and begin to lift interest rates from their emergency lows before the end of next year, ahead of its published schedule. The 21-person forecasting panel includes university-based macroeconomists, economic modellers, former Treasury, IMF, OECD, Reserve Bank and financial market economists, and a former member of the Reserve Bank board. Economic growth Only two of the panel expect the economy to shrink further in 2021. The rest expect the economy to grow, two of the panel by at least 5%, something that isn’t out of the question given that the economy shrank by 7% during the worst three months of the 2020 coronavirus restrictions and clawed back only 3.3% in the three months that followed. Panellist […]