Big Four consulting firm Deloitte has hailed vaccines as the best possible stimulus for Australia’s economy as it affirms the nation’s recovery is delayed, not derailed.
The accounting multinational flagged what it calls a “two-track global recovery” as jab rates soar and advanced economies continue to move towards pre-pandemic levels.
But a fully-fledged comeback is not yet here: developing nations are “doubly exposed” thanks to lower vaccination rates and a higher chance of new COVID variants, prolonging their recovery into 2023.
It’s because of this that Deloitte surmises: “The Australian economy isn’t broken – it is merely locked down.”
The Deloitte Access Economics quarterly Business outlook forecasts Australia’s economic performance in the year(s) to come.
“Two-track global recovery”
The September quarter outlook adopts a robust position on Australia’s economy as the eastern states sprint towards the 80% double-dose vaccination milestone.
States with less exposure to the current outbreaks, however, are lagging behind in the vaccine race and should hit the 80% mark around December.
Deloitte stated: “Vaccinations are slowly beating mutations in the rich world. But the poor world remains mostly unvaccinated.
“That’s a problem for everyone, as it means more mutations could be coming.”
It’s this double-edged sword the firm believes is keeping rapid recovery at bay.
“As the likes of the US recover, they’ll start to unwind their policies of super-cheap credit, yet those policies have helped the poor world stay afloat.
“So we see a two-track global recovery, with advanced economies continuing to recover and repair through 2022, but the developing world stuck in the doldrums until 2023.
“And although that global backdrop is pretty good, China is amid a sharp slowdown, so the net impact of global economic developments on the Australian economy is turning down once more.”
Vaccines are key
Deloitte believes there are elements outside the vaccine world that are keeping recovery at bay.
“Most Australians have been locked down. Confidence has been hit. Iron ore prices have plummeted,” the multinational accountant explained.
“And although government supports have lifted, they’re smaller than they were during Melbourne’s second wave.”
But Deloitte says its confidence in the nation’s continued recovery lies beyond these headwinds.
“Focus on vaccination rates. Vaccinations are the best possible stimulus for our ailing economy – with daylight second.
“Forecasts for everything from wages to unemployment to hospitalisation and haircuts depend on vaccinations.
While just a few states have turned the dial when it comes to vaccine mandates, Deloitte is holding out it’s enough to keep the rebound steady.
“Even with only timid support from our leaders, the recovery through 2022 should still be excellent.
“The Australian economy isn’t broken – it is merely locked down.”
Jab rate to impact job rate
“The good news is rapid vaccinations have reduced the damage and the job recovery should be great,” Deloitte noted.
“But just how great will depend on how many people don’t get jabs.
The firm went on to say that fewer jabs would equal fewer jobs and that the lack of vaccine mandates could slow and even cap job recovery.
It also considered how and when international borders would fully reopen.
With a very gradual resurgence and some form of quarantine still at play, Deloitte reckons we’ll see overseas travel stay weak in 2022.
That slump could roll over into the coming years and travel may not return to pre-pandemic levels until the mid-2020s at this rate.
“We’ve been plenty spooked by COVID, and that may keep flows over Australia’s borders on a tight leash for some time,” the firm explained.
Where are markets at?
Commenting on the nation’s economics, the consulting firm conceded inflation has bounced, but it will be a while before we see a sustained increase owing to its link to wage growth.
And on the market side, Deloitte thinks we’ve switched to decaf as the phantom inflation scare wears off.
“Luckily the Reserve Bank kept a cool head. It is sticking to the view that it won’t raise its cash rate until 2024.
“We think that’s the right approach – so right that, ironically, it could repair the economy enough that the first rate rise arrives in 2023.”
You can read the rest of Deloitte’s latest outlook paper here.