The Australian economy’s recovery from the corona-recession, and implications for interest rates
Economic Policies, The Australian Economy | 8th April 2021
Saul talks to the Eureka Report’s Alan Kohler about Australia’s better-than-expected recovery from the “corona-recession”, which in turn reflects Australia’s relatively good performance in keeping the virus ‘at bay’ and the larger-than-average volume of fiscal support provided by the Australian Government. He explains how the closure of Australia’s borders to migrants (as well as tourists and students) has significantly reduced the amount of ‘competition’ which Australians who’ve lost their jobs face in seeking new ones: which in turn helps explain why the unemployment rate has fallen faster than expected. He notes that if this continues (as it well might given the slowness in rolling out vaccines in Australia) then the unemployment rate could get to the levels stipulated by the Reserve Bank as necessary for inflation to return sustainably to its 2-3% target range sooner than the “2024 at the earliest” indicated by the RBA in its ‘guidance’ about when it might start raising interest rates. The RBA is one of only two ‘advanced economy’ central banks to have nominated a point on the calendar for when it expects to start raising rates. It might have some explaining to do if it ends up having to move ahead of that date.