Australia to be first economy to bounce back after COVID

Australia’s GDP is forecast to bounce back by September, becoming the first western nation to undo COVID’s devastation.

Australia is set to be the first major western nation to undo the economic devastation wrought by COVID-19.

Leading investment bank UBS forecasts that by the end of September, Australia’s gross domestic product (GDP) will surpass pre-pandemic levels.

Meanwhile, CBA economists estimate the 873,000 Australian job losses caused by the coronavirus crisis will be neutralised even sooner than that.

Federal Treasurer Josh Frydenberg told The Daily Telegraph “our economy has outperformed all other major advanced economies over the course of the past year and that’s a very significant achievement for which more than 25 million Australians can be proud”.

Treasurer Josh Frydenberg says our economy has outperformed most other countries. Picture: NCA NewsWire / Gary Ramage

Mr Frydenberg said the jobless rate may be “bumpy” for a couple of months after the $82 billion JobKeeper wage subsidy scheme ends on March 28 but that both the Reserve Bank and Treasury expected the unemployment rate would then continue to “trend down”.

Further state border closures posed a risk to the ­recovery, he said, because they “cost jobs”.

NSW had proven it was possible to contain outbreaks without locking out other Australians, Mr Frydenberg said.

“State governments will think twice about statewide border closures after JobKeeper ends and they will be more accountable for the economic consequences of their actions,” Mr Frydenberg said. “They must take the health advice but at the same time their response must be proportionate and targeted and it needs to be commensurate with the risk.

Treasurer Josh Frydenberg with Prime Minister Scott Morrison. Picture: Sam Mooy/Getty Images

“The experience of NSW is that they have moved quickly and effectively to identify new outbreaks, to contain them and then to avoid a statewide lockdown,” he said.

“So NSW has shown other states how to do it.”

UBS chief economist ­George Tharenou has forecast Australia’s GDP will “reach pre-COVID” during the three months from the start of July to the end of September. On employment, CBA chief economist Stephen Halmarick told The Telegraph that “within a few months we should back above where we were pre-COVID”.

The most recent Australian Bureau of Statistics ­labour force report, for January, showed a deficit of 63,000 jobs.

The February report is due to be released on Thursday, with expectations that 30,000 positions will have been added. Mr Halmarick has warned that up to 110,000 jobs could be lost when JobKeeper ends.

“But we think that will only have a very temporary impact (on the employment trajectory),” he said.

Mr Tharenou has suggested that payroll data from the Australian Taxation Office implies a “complete recovery in aggregate” already, with some sectors booming while others are still doing it tough.

Speaking to The Telegraph, the Treasurer hinted that the Morrison government is preparing to unveil further financial help to struggling industries.

“We continue to keep a watching brief on the economy,” Mr Frydenberg said.

The economies of China and New Zealand are now bigger than before COVID, CBA’s Mr Halmarick said.

The Australian economy is about seven times larger than New Zealand’s, according to the World Bank.

South Korea’s GDP may surpass pre-COVID levels in the next few months.