OECD upgrades Australia’s ‘faster than expected’ rebound
The OECD expects the Australian and global economies in 2021 will grow about 1.3 percentage points faster than forecast in December.
The OECD expects the Australian and global economies in 2021 will grow about 1.3 percentage points faster than forecast in December, as a new survey revealed Australian businesses were more confident the post-COVID recovery was on track.
The rollout of vaccines and massive new stimulus under newly elected US President Joe Biden and a V-shaped rebound in many countries in the second half of 2020 underpinned the upgrades contained in the Organisation for Economic Co-operation and Development’s interim world economic outlook, released on Tuesday evening.
With the emergency JobKeeper wage subsidy terminating at the end of March, Scott Morrison said the government’s $6.5bn vaccination program marked “the start of a new phase of Australia’s comeback from COVID-19”.
The Prime Minister said on Tuesday that about 100,000 frontline workers would be vaccinated by the end of this week and acknowledged the nation’s “continued economic recovery is inextricably linked to our ongoing success in combating the virus”.
In its latest economic update, the OECD predicted that after contracting by 3.4 per cent in 2020, the world economy would rebound by 5.6 per cent this year — 1.4 percentage points more than anticipated in December.
“Global economic prospects have improved markedly in recent months, helped by the gradual deployment of effective vaccines, announcements of additional fiscal support in some countries, and signs that economies are coping better with measures to suppress the virus,” the OECD said.
It put the success of the vaccine rollout at the heart of the recovery across 2021.
Australia also received an upgrade: the report projected national real GDP would expand by 4.5 per cent in 2021, 1.3 points higher than predicted a few months back and in line with Treasury’s mid-year budget forecasts.
Josh Frydenberg said the nation’s performance on the health and economic fronts was “world-leading.” The Treasurer said the OECD had observed economic growth in Australia was “closing in on our pre-pandemic level.”
“While the UK’s economy contracted by 9.9 per cent, Italy by 8.9 per cent, France by 8.2 per cent, Canada by 5.4 per cent, Japan by 4.8 per cent, the US by 3.5 per cent, Australia was only down 2.5 per cent, outperforming the OECD’s forecasts from its December report of a fall of 3.8 per cent.
“As the December national accounts showed, the Australian economy has recovered 85 per cent of its COVID-induced fall, six months earlier and twice as fast as we expected in last year’s October budget,” he said.
The markedly more upbeat tone from the OECD came as NAB’s monthly survey revealed growing faith among businesses the national recovery would prove resilient, despite the end of JobKeeper this month.
Business confidence in February reached its highest level since early 2010, with companies more optimistic across all states and industries, with the notable exception of retailers in the wake of a bumper Christmas sales period.
Business conditions regained multi-year highs after a January dip.
NAB chief economist Alan Oster said the latest report was “a very positive survey result”.
“Business conditions and confidence are both at multi-year highs and, importantly, we’re starting to see an uptrend in business hiring and investment activity,” he said. “The survey continues to point to a robust recovery in the business sector, despite some tapering of government support beginning in late 2020.”
The survey showed firms’ capacity utilisation was back at 82 per cent and at pre-COVID levels — a positive sign, if maintained, that employers would increasingly look to hire and invest in the months ahead.
The OECD report showed secondary COVID-19 outbreaks across Europe triggered a sharp contraction of 6.8 per cent in 2020, to be followed by more modest estimated growth of 3.9 per cent in 2021 — only slightly higher than predicted in December.
The US received the largest upgrade to growth among developed countries of 3.3 percentage points to a projected 6.5 per cent this year. The OECD said Mr Biden’s multi-trillion-dollar stimulus plan would add three percentage points to US growth in 2021, with the boost to demand spilling over to trading partners such as Canada, Mexico and China.
The world economy was about 1 per cent smaller by the end of last year versus 12 months earlier, with global output set to regain pre-pandemic levels by the middle of this year, the OECD said.
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