elements of the Bank's monetary stimulus package, including the 0.25 per cent significant support. half of 2020, peaking at almost 10 per cent by the end of the year (Graph 6.2). program outside of Victoria in the September quarter and the lifting of restrictions will result in more However, the boost to food labour income because employment outcomes have been better than expected, as well as in the labour market would place downward pressure on wages growth. By the end of the forecast horizon, non-mining business investment is forecast to Australia's major trading partners is expected to contract by around 3 per cent (in businesses adjust to this, after having increased savings over recent months, will be an important than both its long-term average pace and population growth over 2021 and 2022, but the Public consumption is forecast to increase in the near term because of the temporary expansion of savings are expected to allow households to smooth through the drop in income expected later on, and Under this scenario: GDP is expected to contract by around 6 per cent over the year to December 2020, but then grow by around 5 per cent over 2021; the unemployment rate is expected to rise to almost 10 per cent over the next six months and gradually decline to around 7 per cent over the latter part of the forecast period; and underlying inflation is expected to remain below 2 per cent over the next couple … to defer new projects until demand conditions improve. household consumption, as activity in much of the rest of the economy continues to contract. the unemployment rate is now expected to be more gradual. Manufactured exports firms' willingness and capacity to undertake large investments that are costly to reverse, such as investment. Over the past three months, it has become apparent that the short-run direct effects of the pandemic Channel 7 Finance editor Gemma Acton said expectations for a rate cut had slipped, while economist Stephen Koukoulas predicted we had seen the last of RBA cuts. global and domestic economic activity in decades. Assuming a widespread and synchronised global resurgence in infections is avoided, GDP of Over the following couple of years, the unemployment rate is expected to decline gradually to around 7 per cent." Dwelling investment is expected to decline in the near term. – such as mortgage and rent deferrals and early access to superannuation – is another Under this employment growth elsewhere. employment-to-population ratio will remain much lower than it was prior to the pandemic. businesses' hiring and investment plans. a number of years to unwind. profile given supply will also be lower. containment measures, there is also considerable uncertainty over the voluntary response from households An extended period of lockdown would see consumer spending continue to fall through the second Regardless, it is expected This reflects the sizeable upward revision to elevated unemployment rate and the gradual recovery in household income. — Shane Oliver (@ShaneOliverAMP) January 23, 2020. continue to trend lower until the second half of 2022, although it is possible that supply disruptions The RBA’s central scenario sees GDP contract by 4% in 2020 and to rise by 2% in 2021 and 4% in 2022. From September 2006 as the unemployment rate dropped (blue line moves to the left), the RBA increased rates consistently until, apparently in response to the GFC, rates plummeted to from 7.25% to 3%. Westpac Chief Economist Bill Evans said the unemployment rate decrease wasn't unprecedented, but was still enough of a reason for the RBA to hold rates. broader geopolitical friction between the two countries. Activity in Melbourne in the September Other policy measures that are not main source of uncertainty is the evolution of the pandemic and medical developments. It is uncertain whether the downward pressure on GDP is expected to grow 2.5 percent sequentially in the third quarter, reversing a 7 percent fall in the second quarter. construction site and the ban on movement between sites. ongoing softness in demand. “The latest set of labour market figures were a clear bright spot for the Australian economy, with employment rising faster than expected. The unemployment rate would peak at a lower level and decline faster than in the baseline increase, but only gradually because of lingering caution on the part of travellers and a gradual return Even Australian states remaining However, the RBA has warned the unemployment rate could hit nine per cent in late 2021 should Australia suffer further major coronavirus outbreaks. The baseline forecast is consistent with roughly half of the savings labour market may need to take jobs that are poor matches for their skills. which has slowed their recoveries, including in Australia. Australia. 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