Australia has entered 2021 with a positive economic and market outlook, says an economist at Commonwealth Bank.
Stephen Halmarick, chief economist at Commonwealth Bank, said that while the COVID-19 outbreak has made a significant impact on the economy, Australia has done a “better job than just about any other nation in controlling the spread of the virus.”
"This, combined with fiscal and monetary policy support being provided to the economy, and the role played by the Australian banking system, means the economic impact of COVID 19 has been less severe in Australia than many other nations, and less severe than initially expected," he said.
While the COVID-19 outbreak ended Australia's 30-year run without a recession, Halmarick said Australia's economic outlook remains positive.
Halmarick said an “unconventional” monetary policy has been providing support to the economy, especially given the targets of the Reserve Bank of Australia (RBA) on unemployment rate and inflation.
Aside from maintaining the cash-rate target at just 0.1%, the RBA is currently engaged in a quantitative easing (QE) program and will buy $100bn of Commonwealth and state government bonds over the six months to April 2021.
"This strategy provides the nexus between monetary policy and fiscal policy in Australia. Having entered the world of unconventional monetary policy, it is going to be a long time before the RBA can retreat from providing significant support to the economy," Halmarick said.
On a global scale, Halmarick said 2020 would likely be the weakest year for the global economy since World War II but the current year is expected to be better.
"We do expect a solid recovery in 2021, with global growth forecasts at 5.2% — led by the US and China,” he said.