Pandemic fails to dent investor confidence

4 June 2021
| By Laura Dew |
image
image
expand image

There are two macro factors that support a brighter outlook for Australia in the aftermath of the pandemic, according to the Reserve Bank of Australia, and make it different from the Global Financial Crisis (GFC).

In a speech by Brad Jones, head of the international department at the RBA, titled ‘Uncertainty and Risk Aversion: Before and After the Pandemic’, he said there were substantially differences to the crisis caused by the pandemic and the GFC.

“The speed of the recovery in activity and the labour market in Australia bears little resemblance to past downturns. This should give us hope that less economic scarring will result,” he said.

“A second reason why the path ahead may be different from typical post-crisis recoveries is because many Australian household and business balance sheets are in better shape than before the pandemic. This is a result of the unusual size and composition of the policy response in Australia. The increase in household income during the pandemic is unprecedented as far as past downturns go.”

These factors had led to consumers and businesses gaining confidence about their investment plans and Jones said it could “pick up even more strongly” than the RBA had previously forecast.

“It has been encouraging to see consumer and business confidence bounce back strongly, and fewer Australian firms report economic uncertainty is affecting investment plans compared to earlier in the pandemic,” Jones said.

“A key question here is whether households, having survived the worst of the pandemic in reasonable financial shape, embark on a period of unusually strong (‘revenge’) consumption, supported by their significant savings from last year and higher asset prices. Private investment and employment would likely be stronger in such a scenario, with higher income spurring on stronger consumption and investment in a reinforcing cycle.”

Read more about:

AUTHOR

Recommended for you

sub-bgsidebar subscription

Never miss the latest news and developments in wealth management industry

MARKET INSIGHTS

GG

So shareholders lose a dividend plus have seen the erosion of value. Qantas decides to clawback remuneration from Alan ...

2 months 1 week ago
Denise Baker

This is why I left my last position. There was no interest in giving the client quality time, it was all about bumping ...

2 months 2 weeks ago
gonski

So the Hayne Royal Commission has left us with this. What a sad day for the financial planning industry. Clearly most ...

2 months 2 weeks ago

A Sydney-based financial adviser has been banned from providing financial services in the interest of consumer protection after failing to act on conduct concerns. ...

3 weeks 6 days ago

Insignia Financial has made four appointments, including three who have joined from TAL, to lead strategy and innovation in its retirement solutions for the MLC brand....

1 day 7 hours ago

ASIC has cancelled the AFSL of a $250 million Sydney fund manager, one of two AFSL cancellations announced by the corporate regulator....

3 weeks 4 days ago