Australia’s GDP growth to be lower compared to other developed countries

covid-19/RBA/Russell-Investments/GDP/

31 March 2021
| By Oksana Patron |
image
image
expand image

Australia’s gross domestic product (GDP) growth is expected to be lower than most other developed nations this year, largely reflective of the country’s smaller economic drawdown in 2020, due to lower COVID-19 infection rates, according to Russell Investments’ global outlook.

The manager said that it expected there would be a tick-up in insolvencies, but this would not be overly concerning given they were coming from such a low base and were suppressed by temporary legislative changes.

Further to that, both the Reserve Bank of Australia (RBA) and Reserve Bank of New Zealand (RBNZ) would be likely to keep policy accommodative over the next year.

“We don’t expect any changes from the RBNZ, while the RBA will probably undertake a third round of quantitative easing purchases after the conclusion of the second,” the manager said in a report.

“The recent inclusion of the housing market into the RBNZ’s mandate does not increase the odds of a rate rise, in our opinion, but will instead mean more focus on macroprudential policy.

“We see the potential for a return to tighter macroprudential policy in Australia if there is evidence of deteriorating lending standards.”

As far as Australian equities were concerned, Russell Investments expected they would outperform New Zealand equities over the next year given Australia’s relative valuation advantage and more exposure than New Zealand to the cyclical value stocks that would be likely to lead global equity markets higher.

The possible scenario for the US’s real GDP growth would be to stand at 7% for 2021, which would be the best calendar-year outcome for the U.S. since 1984, the manager said.

“We think the Fed’s average inflation targeting approach means the central bank will wait until the consumer price index (CPI) measure of inflation has sustainably reached 2.5% before starting to tighten policy. In our view, this seems doubtful before late 2023,” the report stated.

At the same time, Europe’s post-lockdown recovery would be extremely strong, with a forecast GDP to bounce back by around 5% this year, following 2020’s decline of nearly 7%, while China would be the first country to embark on policy tightening this year.

Read more about:

AUTHOR

Recommended for you

sub-bgsidebar subscription

Never miss the latest news and developments in wealth management industry

MARKET INSIGHTS

So we are now underwriting criminal scams?...

2 months ago

Glad to see the back of you Steve. You made financial more expensive, not more affordable as you claim, and presided ...

2 months ago

Completely agree Peter. The definition of 'significant change is circumstances relevant to the scope of the advice' is s...

4 months ago

Entireti has unveiled the new name for the AMP financial advice businesses that it acquired last year....

4 weeks 1 day ago

A Sydney financial adviser has been permanently banned from providing any financial services, with the regulator deriding his “lack of integrity, trustworthiness and prof...

3 weeks ago

Minister for Financial Services, Stephen Jones, has provided further information about the second tranche of the Delivering Better Financial Outcomes (DBFO) reforms....

1 week 6 days ago

TOP PERFORMING FUNDS