COVID-19 vaccine and Joe Biden presidency will influence Australian finances, says leading economist

Finances took a hit last year with the COVID-19 pandemic, but the doom and gloom could be lifted with an Australian recovery in sight.

It’s good news for many Aussies who experienced a tough time financially last year, with a top economist predicting the country is headed for economic recovery after the pandemic battered global markets.

Craig James, chief economist from CBA’s stockbroking firm CommSec, said a successful rollout of the COVID-19 vaccine would be key to the economy bouncing back.

“Europe and the US are currently experiencing second waves of the virus, driving case numbers to record highs and necessitating fresh lockdowns,” he said.

“The good news is that an effective vaccine is expected to be distributed across the globe, with vaccinations already commencing in the UK. And treatments for the virus are also being developed. The economic outlook will clearly be dictated by the virus and how quickly vaccines can stem case numbers and allow economies to start repairing.”

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The COVID-19 vaccine has already begun rolling out in the UK, while the first Australians aren’t expected to receive theirs until March. Picture: Hugh Hastings/Getty Images

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Australian Health Minister Greg Hunt confirmed the coronavirus vaccine would be rolled ou t in early March in Australia, with the elderly, aged care workers and hotel quarantine and border employees prioritised. More than 1.3 million Brits have already received the vaccine with those on the priority list expected to be done by February. Meanwhile, Australia’s rollout is expected to be completed by October.

Interest rates would continue to be kept “super low for some time”, said Mr James, meaning further rate cuts are unlikely in the next 12 months.

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CommSec chief economist Craig James, sees good signs for an economic recovery. Picture: Justin Brierty

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Cutting interest rates was a key policy from RBA last year to dampen the shock of the pandemic on the Aussie economy, but Mr James said other fiscal solutions will come into play in 2021.

“Borrowing costs for Aussie households and businesses are at rock bottom, driving a housing market recovery, while encouraging firms to invest and hire workers,” he said. “Policy is primarily focused on job creation to reduce scarring in the labour market.”

The changeover in the US presidency, with Joe Biden set to take office this month, could see global economies return to pre-pandemic levels by the end of 2021, forecast Mr James.

But this relied on investors’ hope that Mr Biden will announce a stimulus package of at least $US1 trillion ($A1.2 trillion).

“As president, Joe Biden could introduce tougher financial regulation and impose antitrust measures on big technology companies. His engagement with China on trade issues will also be a key focus along with his foreign policy objectives in the Middle East,” he said. “This is of especial importance to Australian businesses and investors.”

Joe Biden’s presidency could boost the global economy. Picture: Chip Somodevilla/Getty Images / AFP

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Trade disputes have dominated Australia’s relationship with China recently, amid worsening tensions between the two countries at the end of last year.

Last month, Beijing lashed out at Australia’s decision to refer it to the World Trade Organisation over barley tariffs, while beef exports were slapped with restrictions and Aussie wine was hit with tariffs.

Mr James added that the global economy slowed over 2019 as the Trump trade war soured US-China relations, creating uncertainty for businesses and financial markets.

“Most observers believe that Biden will adopt a tough but conciliatory stance with China rather than a ‘tit-for-tat’ tariff battle,” he said.