SYDNEY (Reuters) – Australia’s economy is forecast to have grown the fastest in the past 12 years, although the country has yet to get out of trouble with fiscal stimulus easing and companies hit by the coronavirus are still reluctant to increase spending.
Official figures on Wednesday will show the economy grew by about 2.5% in the July-September quarter, according to a Reuters poll, bouncing back from its first recession since 1991. Gross domestic product slumped 7% in the previous three months as the coronavirus control brought it back. a lot of impact. the country came to a standstill.
Growth in the current quarter looks stronger as the state of Victoria, previously a hotspot for COVID-19, emerged from the lockdown of the marathon in October, while other states reopened widely in May. Most of Australia, including Victoria, has seen no new community cases for weeks.
Even so, the country’s central bank is expected to keep policy rates near zero and extend its A $ 100 billion ($ 73.86 billion) quantitative easing program next year as inflation and unemployment are likely to lower its target range for the time being.
“The biggest unknown is whether consumers and businesses are spending money,” said Peter Munckton, chief economist at the Bank of Queensland.
Business investment, badly needed to boost productivity and growth, is still frozen while unemployment has risen to 7.2% from below 5% before the pandemic and there is no sign of wage inflation.
“The central case economic forecast for the next two years is still not good enough,” added Munckton.
“Current projections have sharply reduced fiscal policy support in the next financial year. It also means that the Reserve Bank may have to further increase the size of its bond-buying program. “
However, the short-term prospects are better.
Preliminary data on Monday showed fewer Australians were on the government’s “Keeper of Work” temporary welfare payments in October as the economy continued to reopen, allowing more people to return to work.
Business and consumer confidence have surged in recent months while household spending has also surged. The price of housing and home loans has also increased.
Most economists have increased their GDP forecasts for the last two quarters of 2020.
A rise in GDP in the fourth quarter will see Australia and New Zealand into outliers, with growth in other parts of the developed world expected to slow as countries face a new wave of infections.
Some expect Australia’s economic output to return to pre-pandemic levels as soon as the first half of next year.
Conversely, several countries in the northern hemisphere should continue with lockdown conditions, suggesting “expectations for pre-COVID activity levels need to be pushed further into the future,” said Citi economist Josh Williamson.
Reporting by Swati Pandey; Editing Ana Nicolaci da Costa and Sam Holmes