With the approach of 2021, the world continues to struggle with COVID-19 and its effect on the global economy.
While Australia has weathered the Coronavirus storm well compared to many other countries, the unemployment rate sits at 7% and the underemployment rate at 10.4% (ABS 2020). No firm dates have been set for re-opening Australia’s international borders, indicating significant setbacks for the travel industry in the short term. More positively, it was announced at the beginning of December 2020 that the recession is technically over.
Shane Oliver (PHD) from AMP expects growth in 2021 of 4-5% for a number of reasons, such as the following:
VACCINES ON THE WAY:
Pfizer and Biontech have released a vaccine which demonstrated an efficacy rate of 95% in a Phase 3 clinical study (Pfizer 2020). If the vaccine is approved for use in Australia, 10 million doses will be available locally from early 2021 (Department of Health 2020). Similarly, Moderna and Oxford/Astrazeneca have released vaccines with similar efficacy rates.
Dr Oliver says the Australian government’s stimulus measures are another reason why Australia can expect a good economic rebound in 2021. In May 2020, analysis by BIS Oxford Economics found that Australia spent more with respect to its fiscal response to the COVID-19 pandemic than all but one of the 46 countries analysed (Cranston 2020).
The 2020-21 Budget includes provision to commit a further $98 billion, including:
- $25 billion in direct COVID-19 response measures
- $74 billion in new measures to create jobs
The government’s aim is to:
- Grow the economy by 4.25% next year
- Bring unemployment levels down to 6.5% by the June quarter 2022
THE BUDGET AND THE LONGER TERM:
The government’s modern manufacturing strategy involves investments of $1.5 billion over 4 years to ensure Australia’s manufacturing sector is “highly competitive and resilient” and that more high value jobs are created in the process (Treasurer 2020).
The government says its infrastructure investments, included in the 2020-21 Budget are supporting 100,000 jobs on worksites around Australia and take its 10-year infrastructure pipeline to $110 billion. It also says the measures announced in the Budget, combined with what was announced since the beginning of the COVID-19 crisis, amounts to $14 billion in “new and accelerated” projects that support a further 40,000 jobs (Treasurer 2020).
Dr Oliver says the reality is that Australia will have high budget deficits for some time to come, but Australia’s net debt is about one quarter of what it is in other advanced countries. He also notes the level of interest payable by the Australian government on the debt is ‘ultra low’ and the money is also being borrowed in Australian dollars.
NEW US PRESIDENT:
Dr Oliver believes a BIDEN presidency will cause more stable policy making in the US, causing a stronger US economy as part of the global economy.
There are no signs of the global COVID-19 crisis abating any time in the near future, so it is expected the pandemic will continue to affect both local and global economies in 2021. The success of various vaccines will play an integral role in whether Australia and its counterparts can reopen and return to normalcy as the year progresses.
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