A key Reserve Bank official warns economic recovery from the coronavirus pandemic will be protracted and uneven in Australia and the rest of the world.
Assistant governor for economics Luci Ellis says Australia’s economic growth will probably take several years to return to the trend path expected before the virus outbreak.
“We estimate that activity contracted severely in the June quarter of this year but began to recover late in the quarter,” Dr Ellis told an Australian Business Economist webinar function on Friday.
“The situation in Victoria will reduce growth in the September quarter and push out the recovery beyond that.”
Speaking shortly after the Reserve Bank released its quarterly statement on monetary policy, Dr Ellis said the central bank had provided three separate scenarios for the outlook because of the many potential risks and uncertainties.
“The main one, though, is the spread of the virus, both here and abroad. The difficult situation in Victoria is an example of how quickly this can change,” she said.
Under the baseline case, the unemployment rate is expected to reach about 10 per cent at the end of the year compared with 7.4 per cent now, and then fall to about seven per cent during the next couple of years.
It is based on the assumption that infection rates subside in Australia, with the tightening of restrictions in Victoria successful in getting its outbreak under control and no new lockdowns brought in elsewhere.
The upside scenario assumes infection rates fall more quickly and stay low, and the unemployment rate peaks at a lower rate.
The downside scenario assumes infection rates continue to escalate around the world and Australia faces a series of outbreaks and tight restrictions, which would see the jobless rate remain close to its peak throughout 2021.
“The near term would be stronger if there were a major medical breakthrough on treatments soon,” Dr Ellis said.
“An effective vaccine would take a bit longer to be distributed so it would mainly affect outcomes next year and the year after.”