Faster global rollout of Covid-19 vaccine a $17bn boost to Australia: KPMG

A faster international rollout of COVID-19 vaccines would boost the Australian economy by $17bn and generate nearly 40,000 jobs.

A faster international rollout of COVID-19 vaccines would boost the Australian economy by $17bn, according to KPMG.

A faster international rollout of COVID-19 vaccines would boost the Australian economy by $17bn and generate nearly 40,000 jobs, according to new analysis by KPMG.

But a slower-than-expected rollout, meaning ongoing international travel restrictions until the end of 2021, would see global services trade remain depressed, stripping $4bn from the economy, the consultancy said in its quarterly economic outlook.

“A global delay in the rollout of vaccinations and the subsequent opening up of international borders would have a disproportionately larger negative effect on Australia,” KPMG Australia chief economist Brendan Rynne said.

“A continuation of the drop in migration we are now experiencing would have serious implications for our projected population figures and GDP by the end of the decade.”

From a global perspective, the KPMG modelling showed how the economic recovery would be dependent on a smooth and uniform vaccine rollout, he added.

The consultancy’s base case is that global GDP will rise by 4.4 per cent this year. This rises a further 2.8 per cent if the rollout proceeds at an accelerated pace, or a full quarter ahead of schedule.

On the other hand, if the rollout proceeds three months slower than expected, it will translate to a 1.2 per cent hit to GDP.

“The profile of the upside scenario GDP suggests the faster rollout of the vaccine generates a ‘sugar-hit’ for most economies, with consumption activity temporarily boosted by pent-up demand. In some cases, this temporary boost includes consumption expenditure brought forward from future periods,” Dr Rynne said.

But in the downside scenario, a quarter of international travel would be restricted until the end of 2021. GDP growth would be weaker in all countries, especially those that have not secured access to sufficient doses of vaccine. This includes large parts of Africa and Latin America.

As vaccine production has ramped up since late 2020, the wealthiest countries have raced to secure supply.

But citizens in all countries would need to be vaccinated before borders opened, Dr Rynne warned.

“The poorest of countries are just as important as the richest countries, in understanding that equation. Beneficially, there is not only the social good associated with COVAX but quite clearly economically there’s a benefit in making that happen as well.”

COVAX is a global initiative aimed at ensuring all countries have “fair and equitable” access to the COVID vaccines. It is targeting that two billion doses will be provided to low and middle-income countries and to have 20 per cent of the world’s population vaccinated by the end of 2021.

In its first quarterly outlook since the COVID-19 crisis began a year ago, KPMG also said it expected the Australian economy to perform strongly this year, with GDP boosted by “the unlocking pent-up demand from a lockdown-affected 2020”. But it expects this boost will start to taper off in 2022.

“Our forecasts on inflation (rising) and unemployment (falling) mean that by next year the RBA will come under pressure to review its pledge to keep ultra-low interest rates until 2024. The inflation genie is still in the bottle but can definitely be seen edging up the sides,” Dr Rynne cautioned.

RBA governor Philip Lowe has repeatedly said rates will stay low until at least 2024, despite the market predicting otherwise.

At a business summit earlier this month, Dr Lowe said the unemployment rate would need to be close to 4 per cent before wages and inflation started to rise. The unemployment rate may even need to be sitting below 4 per cent to trigger inflation, he cautioned.