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A ‘less bumpy ride’ predicted for the economy in 2022

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The pace of economic recovery in 2022 is likely to be less volatile than in 2021.

Janus Henderson is predicting a less bumpy ride in 2022 as statewide lockdown risk diminishes.

Discussing key events of 2021 and what to expect in the year ahead, Frank Uhlenbruch, investment strategist in the Australia fixed interest team, predicted strong vaccination rates should ensure a faster pace of recovery next year.

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That said, he warned that the recent emergence of the Omicron variant of COVID-19 could increase uncertainty.

“The threat from this new variant and its potential to affect the economic outlook remains to be seen,” Mr Uhlenbruch said.

For now, Janus Henderson is predicting economic growth of around 1.75 per cent over 2021, before accelerating to 5.25 per cent over 2022. But growth is expected to ease back to 2.75 per cent over 2023.

Touching on the hot topic of inflation, Mr Uhlenbruch predicted acute pressures in early 2022, followed by an easing as supply chains catch up to pent up goods demand.

Nevertheless, the risk of cyclical price pressures finding their way into higher core inflation is higher than it has been for many years,” he said.

As for the likelihood the Reserve Bank of Australia could lift the cash rate earlier than anticipated, Mr Uhlenbruch expressed doubt.

Janus Henderson’s view, he said, is that the RBA’s key hurdles – an unemployment rate of close to 4 per cent, wages growth of at least 3 per cent and actual inflation around 2.5 per cent – won’t be cleared next year, despite many pundits foreseeing as many as four cash rate movements.

“Our view is that these hurdles will not be cleared until mid-2023 when we expect the RBA to commence a tightening cycle that takes monetary conditions from a highly accommodative to a more neutral stance.”

 

 

A ‘less bumpy ride’ predicted for the economy in 2022

The pace of economic recovery in 2022 is likely to be less volatile than in 2021.

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Maja Garaca Djurdjevic

Maja Garaca Djurdjevic

Maja's career in journalism spans well over a decade across finance, business and politics. Now an experienced editor and reporter across all elements of the financial services sector, prior to joining Momentum Media, Maja reported for several established news outlets in Southeast Europe, scrutinising key processes in post-conflict societies.

 

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