National Australia Bank (NAB) has forecast that the Victorian economy will contract by 9.2% in 2020-21, with the state’s six-week lockdown reducing output by 15% in the September quarter alone:
The restrictions in Victoria could well reduce Victorian output by around 15% in Q3. Nationally that would take around 3 per cent off Q3 GDP. Over the course of 2020 we now see output down around 5.7% nationally including a fall of 6.25% in Q2 (-3.8% in year average terms). With the withdrawal of current fiscal stimulus in early 2021 we don’t really see a rebound in growth till mid 2021. As a result we see GDP rising by around 3% through 2021 –but less than 1 per cent in year average terms, with GDP not returning to its end 2019 level until early 2023…
Consequently, unemployment is expected to peak at around 9.6% in early 2021, and to still be around 7.6% by end 2022. One implication of this is wages growth will remain lower for longer, as will inflation.
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Leith van Onselen is Chief Economist at the MB Fund and MB Super. He is also a co-founder of MacroBusiness.
Leith has previously worked at the Australian Treasury, Victorian Treasury and Goldman Sachs.
