Australia: Economic recovery 'faster and stronger' than expected – CBA

In the view of Gareth Aird, Commonwealth Bank’s (CBA) Head of Australian Economics, the Australian economy is expected to rebound from its worst recession in a hundred years much faster than previously thought, as cited by InvestorDaily.

Key quotes

“When GDP and employment collapsed in Australia over Q2 20 comparisons were made with the Great Depression.”

“We had not seen such a sharp deterioration in economic data since the 1930s. But the similarities between the Great Depression and the COVID-19 pandemic from an economic perspective only pertain to the Q2 20 activity data.”

“Provided transmission of COVID-19 in Australia remains low, particularly community transmission, the strength of the economic recovery in 2021 will surprise many.”

“We believe the metaphorical ‘bridge’ has been built very well and sets Australia up for a prosperous next two years.”

“The upshot is that we will see a savings drawdown in 2021. This will provide a significant tailwind to consumption as pent up demand is unleashed.”

“We readily acknowledge that there is uncertainty around what proportion of savings will be used to fund expenditure and how fast accumulated savings will be spent. But the elevated level of consumer confidence means a material drawdown is likely, particularly when factoring in why the savings were accrued.”