The economy is back in force but the celebration must be tinged with caution
However, border closures have been unequivocally bad for the higher education sector. Indeed, one of the weaker features of this week’s economic report has been a noticeable drop in “public sector consumption”, largely due to a sharp drop in university payrolls following massive layoffs in the world. the end of last year.
More generally, the federal government has managed to get the Australian economy through this difficult period. We owe him as much credit for this as we owe him condemnation for his more recent mismanagement of the national health response. What we will get to.
But again, let’s celebrate first. Importantly, the Morrison government has managed to wean the economy off its historic JobKeeper wage subsidy program without causing too much turmoil. Incomes actually grew a little faster than expected in the March quarter, despite the withdrawal of government benefits, thanks to good employment prospects in the private sector.
Two other Morrison government stimulus packages are also due to the positive aspects of this latest economic record. Business investment in machinery and equipment has risen sharply, boosted by a measure allowing them to instantly write off newly purchased assets for tax purposes. The HomeBuilder program has also supported the home construction industry.
Whether by good design or luck – probably a healthy dose of both – Australia’s myriad of coronavirus budget support programs have worked dramatically to cushion our economy, in combination with low interest rates and success. reduction of the virus itself.
More recently, of course, failures in the government’s health and immunization response – particularly the failure to immunize both residents and workers of elderly care facilities – have come to the fore.
In the midst of this lingering uncertainty over the outlook for Victoria, our central bank still has little appetite to start gaining a foothold on the interest rate accelerator by raising rates. Ultra-low lending rates will stay with us until the Reserve Bank is crystal clear that the economic recovery is assured and our unemployment rate has fallen to a level sufficient to trigger growth. salaries.
We are not there yet. And the longer it takes to get there, the worse it gets for aspiring homebuyers – and their worried families – as low credit rates fuel rapid increases in house prices.
Looking ahead, the Reserve Bank and Treasury forecasts are based on the assumption that Australia’s immunization program is, as expected, widely rolled out by the end of the year.
In the meantime, Victoria’s closure threatens economic recovery, but there is also a silver lining. If the Victorian fear convinces more Australians of the urgent need for the vaccine – where medically advised and available – it could have a silver lining in the economy.
Because there is no truly sustainable path to return to economic normalcy until the Australian population is successfully vaccinated and the pattern of ad hoc lockdowns and closures cannot be ended.
Hold the champagne, pass the needle.