The OECD has confirmed that Australia is leading the global economic recovery, but warned that its crisis response needs fine-tuning.
The Organisation for Economic Co-operation and Development anticipates that Australia’s GDP could fall by 5 per cent in 2020, or as much as 6.3 per cent in the event of a second outbreak, but believes the country has been spared the worst of COVID-19.
“Economic activity collapsed in the second quarter of 2020, as lockdown measures to fight the pandemic required many businesses to suspend activities and consumers to stay home,” the OECD said. “However, confinement has been less strict than elsewhere thanks to the relatively mild virus outbreak.
“Massive macroeconomic policy support, including a temporary wage subsidy, is limiting the economic shock.”
The economic contraction will be concentrated in the second quarter, while activity will recover as restrictions ease and consumers resume spending.
But the report warns that Australia risks jeopardising its recovery if it unwinds fiscal support too early and that it should consider further investment in energy efficiency and social housing to cement its success.
“The authorities should be considering further stimulus that may be needed once existing measures expire at the end of the third quarter 2020,” the report reads. “Such support should focus on improving resilience and social and physical infrastructure, including strengthening the social safety net and investing in energy efficiency and social housing.”
The report was welcomed by Treasurer Josh Frydenberg.
“Australia stands out as a leader in the economic recovery,” Treasurer Frydenberg told media. “The OECD in its report also praises Australia for moving quickly to close its borders and put in place the necessary health restrictions, which has helped us flatten the curve so successfully here.”
The Morrison government has committed to ending its JobKeeper and JobSeeker programs in September despite warnings it could lead to negative employment outcomes for many Australians currently out of work.
“The government will continue to plan for the many months ahead and indeed the many years ahead,” Prime Minister Morrison told Parliament. “The government’s plans go forward to ensure that we can rebuild the economy, that we can get Australians back into jobs and we will be using the full suite of measures that have been available to us very early on in the crisis.”
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