Australia sets an example in boosting economy in Covid times  

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2020 may have been a testing time for most economies but Australia’s economy has a different story. It expanded at a much faster-than-expected pace in the final quarter of last year and there are all signs that 2021 has started on a firm and good footing, helped by massive monetary and fiscal stimulus.

In the three months of 2020, the economy accelerated at 3.1%, data from the Australian Bureau of Statistics (ABS) showed. Economists in a Reuters poll forecast a 2.5% rise following an upwardly revised 3.4% gain in the third quarter.

Despite the best ever back-to-back quarters of growth, annual output still shrank 1.1%, underscoring the havoc wreaked by the coronavirus pandemic and suggesting policy support will still be needed for the A$2 trillion ($1.57 trillion) economy.

The Australian dollar rose about 10 pips to a day’s high of $0.7836 after the data while bond futures nudged lower with the three-year contract implying an yield of around 0.3% compared with the official cash rate of 0.1%.

According to Craig James, Sydney-based chief economist at CommSec, “The ‘V-shaped’ nature of the recovery is everywhere to see – economic growth, the job market, retail spending and the housing market.”

“But the job is not done. The economy is still around 1% smaller than a year ago. Unemployment is still too high; inflation and wage growth are still too low.” James expects the economy to rebound 4.2% in 2021, led by stimulus and support measures.

Source: Reuters