RBA: Economy will contract by around 10% in the first half of 2020 – Westpac

The Reserve Bank Governor has provided the Bank’s first forecasts during this crisis, per Westpac Institutional Bank.

Key quotes

“The economy will contract by around 10% in the first half of 2020 with most of the contraction centred around the June quarter. Westpac forecast contraction of -0.7% in the March quarter followed by -8.5% in the June quarter.”

“The Governor forecast that the Australian economy would contract  by 6% in 2020 compared to our forecast of minus 5% . We forecast a growth “bounce back” of around 5% in the second half of 2020, centred mainly on the December quarter.”

“We do differ on the pace of growth in 2021 with the RBA expecting a spectacular 6-7% in 2021 whereas we expect around a 4% recovery with the economy still being smaller by around 1% by the end of 2021 compared to the beginning of 2020.”

“We forecast that the unemployment rate was likely to fall to 7% by year’s end but remain above 6% in 2021. The Governor concurs noting ‘the unemployment rate will remain above 6% for the next couple of years’. We agree but expect that if the RBA achieves it’s 6-7% growth forecast in 2021 then unemployment is likely to fall somewhat below 6%.”