The Australian economic recovery is believed to be going faster and stronger than what most economists have expected, this is the prediction of Commonwealth Bank’s head of Australian economics, Gareth Aird.

It is now expected that GDP will contract by 3.3 per cent in 2020 but will have a stronger recovery in 2021. Over the next two years, GDP is predicted to grow by 4.2 per cent in 2021 (previously 2.5 per cent) and another 3.8 per cent in 2022.

According to Aird, the similarities between the Great Depression and the Covid-19 pandemic from an economic perspective only pertains to the second quarter activity data. Although the drop is similar to the 1930’s the huge monetary and fiscal support injections that did not occur during the Great depression, made a very big difference. The government’s fiscal support packages were designed to keep as much of the economic furniture intact so that when restrictions were eased, activity could rebound swiftly.

The economic data at the national level has improved since the middle of the year and it is expected that a decent bounce in GDP over the second half of the year to show up in the third and fourth quarter national accounts.

Mr Aird concluded that the metaphorical ‘bridge’ has been built very well and sets Australia up for a prosperous next two years.

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Date Published: 16 Nov 2020