Australia witnessed its first recession in almost three decades in 2020. After flirting with the idea of a technical recession during 2019, the Covid19 pandemic resulted in a complete shutdown of economic activity – tipping the balance and putting “The Lucky Country” in a technical recession.
However, the recovery has started quicker than many expected and ahead of most other developed economies in the world. A lot of credit here has to go to the sublime management of the pandemic down under. We beat the curve and with regular stimulus being introduced into the economy, the Australian economic forecast for 2021 is positive.
During the first quarter of the 2021 fiscal year, consumer spending has bounced back – dragging the Australian economy with it. With low interest rates very likely to persist for the next couple of years, measures are in place to further boost activity.
The Australian economy boasted GDP increase of 3.3% in the first quarter of FY2021 – beating forecasts. This rebound was on the back of when the Australian Bureau of Statistics said the economy had contracted by 7% in Q2 of calendar year 2020.
With that said, during this time, the stock markets have shown that their correlation with the economy isn’t all that positive. The markets have a very positive outlook for 2021 as well, and it is important to put the best stocks to look out for in 2021 on your watchlist.
Unemployment is inevitable during a recession. However as the economy rebounds, this is arguably one of the most important macroeconomic factors to keep an eye on. The federal government’s economic policies have been targeted to decrease unemployment by introducing programs such as JobKeeper. After witnessing a 22-year unemployment of 7.5% in July, 50,000 new jobs were added in December 2020 alone, and the unemployment rate has reduced to 6.6% as we head into the year. As the economic activity improves, the unemployment rate should reduce further. It is worth noting that, prior to the pandemic, the unemployment rate down under was 5.1%.
The Australian economy has begun its rebound and forecasts suggest that the GDP is expected to grow by 4.5% in 2021. With much of the country now easing restrictions and the emergence of a vaccine, activity is forecasted to continue to increase. Stimulus has been injected orderly by the government to give the economy a boost. The 4.5% figure comes as an upgrade over the previously suggested 4.25% by the Treasury.
The Australian commodity sector is extremely reliant on export. A lot of factors have boosted the mining industry as iron ore and copper prices have soared and Australian exports are thriving. As the world gets vaccinated, economic activity globally will increase – leading to higher demand for export products. The China-Australia tensions however, have come at a very bad time, and a quick resolution here will do wonders for our export sector.
International Tourism is also bid to bounce back by late 2021. The vaccine has sped things up when it comes to travel. Immigaration and international students are a vital part of the Australian economy and a rebound here is extremely critical for a number of businesses.
The Australian economic forecast looks good considering all the pressure it has been under in the past year. While there is often a disconnect between the economy and the equity markets, the broader economy does bring a lot of macroeconomic factors into play – supporting specific sectors and certain stocks. Shares in Value helps you identify those trends, sectors, and stocks – helping you invest smarter.