The OECD has slashed Australia's economic growth prediction, but the country is anticipated to escape a double-dip recession because of the COVID-19 Delta outbreaks in key cities.
By contrast, the Organization for Economic Co-operation and Development anticipates the Australian economy to grow by 4 percent in 2021, down from its May projections. For the second time in a week, a Paris-based research organization has downgraded the economy of every nation it examined in its interim economic assessment.
For the year 2022, it slashed its Australian projection by 0.01 percentage points to 3.3%.
For the year 2020, Australia's GDP contracted 2.5%, beating the rest of the world's growth of 1.9%. Spanish GDP shrank by 10.8%, British GDP by 9.8%, and French GDP by 8% last year due to a lack of growth in their respective economies.
However, the recent lockdowns in Australia are projected to slow the country's economic recovery in the coming years. According to the OECD, monetary policy should remain accommodating, while fiscal policy should be flexible based on the current situation of the economy.
As stated by the report, "a premature and abrupt removal of policy assistance should be avoided while the near-term outlook remains unclear."
Initial worries of a double-dip recession have been allayed owing to the intentions of NSW and Victoria to begin restarting their economies within a few weeks of the shutdowns.
When it comes to vaccination rates and states opening up, Deloitte Access Economics partner Chris Richardson says that things are looking good.
However, Sean Langcake of Oxford Economics acknowledged there were certain dangers, but a quick improvement in the situation would help minimize lasting damage.
Despite the immediate impact of the introduction of the Delta coronavirus strain, Mr. Langcake expects a stronger growth prognosis for 2022.
There has been a downward revision in the baseline scenario for Australian GDP growth to 2.9% in 2021, with a recovery to 3.8% in 2022 when limitations are eased back in the fourth quarter, according to research released by the business. It is worth noting that this will have an effect on the country’s exchange rate as well as on the Forex market.
Some of the Australian currency trading brokers suppose that extended COVID lockdowns are expected to lead to GDP growth of 2.6% in 2021, and 2.6% in 2022. Moreover, under a "boom" scenario where consumers spend much more than expected, a 3% GDP growth is expected in 2021 and a 5.3% GDP growth is likely to happen in 2022. This week's ANZ-Roy Morgan weekly consumer confidence poll hit a nine-week high nationwide, but lockdowns in NSW and Victoria are dragging down the results in those states.
Australia’s Economic Growth And Inflation Rate For 2022
Despite a severe pandemic-induced recession last quarter, Australia's central bank expects the economy to rebound fast despite needing to raise its inflation forecast as global supply constraints have a stronger effect than initially assumed.
Two years earlier than predicted, the Reserve Bank of Australia said in a quarterly report on the economy that inflation has returned to its goal range of 2-3 percent, forcing it to renounce a pledge to maintain bond rates extraordinarily low.
As the economy began to recover, policymakers rethought their estimates that interest rates would not increase until 2024, suggesting that a rise in 2023 was now possible.
Coronavirus lockdowns reduced activity substantially in the third quarter but world-beating vaccination rates have subsequently enabled the economy to recover and consumption has surged.
This research by the Reserve Bank of Australia predicts "a fast bounce back in domestic demand" in the December and March quarters as limitations are further relaxed.
It now expects GDP to fall to 3% this year, from 4% earlier, then rise to a dizzying 5.5 percent in 2022 as a result of this policy change.
Core inflation currently stands at 2.25 percent for the end of the year, up from an earlier projection of 1.75 percent... However, it is expected that inflation would only rise to 2.5 percent by the end of 2023 as a result of additional development.
Gains in earnings have trailed below inflation for years, which has kept prices low. In order to keep inflation in check, the Reserve Bank of Australia says salaries must increase by at least 3% annually. However, this level of pay growth won't be achieved until the end of 2023, according to the RBA.
Even though financial markets are pricing in a rate hike as early as July, RBA Governor Philip Lowe said it was "very improbable" that the RBA will raise interest rates next year.
By the time the current 0.1 percent cash rate expires in 2022, futures and swaps indicate that it will rise to 1.0% and 1.5% by the end of 2023, respectively.
Several policymakers have pushed back against the trend of tightening in the developed world as markets have moved strongly in recent weeks.
Investors were taken aback when the Bank of England decided not to raise interest rates on Thursday, while the European Central Bank aggressively lowered expectations.
