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What a year it’s been.
This time last year Australia was heading into its first recession and deepest recession in decades.
Yet last week the Australian Bureau of Statistics confirmed the strength of Australia’s economic rebound.
It was the fastest economic recovery from a recession in 45 years.
In fact, we are one of only three countries where our economy is ahead of where it was at the beginning of the coronavirus pandemic, but today can race and I unpack the statistics and explain what’s going on – the truth behind Australia’s economic recovery.
But don’t worry if you’re not into economics, my chat today with Ken Raiss, Australia’s leading property tax strategist, will be in plain English and we’ll unpack what’s going on so you understand what’s ahead- both the good and some of the headwinds that may slow us down, so that you’ll be able to make a better-informed investment, and financial, and business decisions.
What you’ll be hearing today is a portion of a private webinar we conducted for the attendees of Wealth Retreat to give them some insight before they join us, and while you won’t be able to see the slides, I’m sure our description will be sufficient for you to get benefit from our chat.
Australia’s impressive economic recovery from the COVID-19 recession was confirmed with the strong 1.8 percent rise in March quarter GDP.
This followed unprecedented growth of 3.2 percent in the December quarter and 3.5 percent in the September quarter of 2020.
Our economic output is now higher than it was before the COVID-19 recession hit, with easy monetary policy, booming commodity prices, demand for resources from the rampant Chinese economy, and fiscal policy stimulus all playing a part.
Back in the first three months of this year when we had JobKeeper, enhanced unemployment benefits, and no lockdowns and Australia roared out of recession.
The GDP figures released at the beginning of June, which were for the first quarter of the year up till the end of March were for the months leading up to the end of JobKeeper.
Australians spent, earned, and produced an impressive 1.8% more than in three months to December, which was itself more 3.2% more than the three months to September, which was itself 3.5% more than the three months before that.
Our growth of more than 8% was the most over three quarters since 1968.
But it followed a collapse in the gross domestic product of 7% – by far the worst since the Bureau of Statistics began compiling records in 1959.
The net result over the year to March growth of 1.1%, an extraordinary result which means that, at least until Victoria’s (just extended) lockdown, we were producing, earning, and spending more than before the COVID recession.
I today’s podcast Ken and I discuss:
- what GDP is and why so much fuss is made about it
- Why I think that having a single overriding ‘economic’ health measure such as GDP is flawed
- What’s happening to unemployment, job growth, business, and private expenditure.
Here are 7 reasons to be optimistic about the future.
- Covid vaccines will help in underpinning reopening and recovery
- Global growth is recovering rapidly — driven by vaccines enabling reopening, monetary and fiscal stimulus, and pent-up demand.
- Growth in consumer spending is well supported
- Dwelling investment will provide a strong contribution to growth — the surge in building approvals points to more upside in housing construction this year.
- Business investment is strengthening – — investment plans for the next financial year are up nearly 15% on plans for a year ago which is consistent with high levels of business confidence, excess corporate cash, and the instant asset write-off tax break.
- Fiscal stimulus will continue
- Monetary policy will remain easy
However, there are some headwinds.
Economic growth should continue this year and then could slow next year as some headwinds are revealed, the effects of the fiscal measures start to fade, and the housing market slows down a little.
- further coronavirus outbreaks
- economic ramifications of the international border closure,
- the potential for further lockdowns due to the slow vaccine rollout, and
- the geopolitical risks emanating from Australia’s “strained” relationship with China.
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