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Deloitte Access Economics’ latest Business Outlook shows that Australia’s economy is roaring back. Employment is within a whisker of pre-COVID levels, unemployment is below 6%, households are spending and businesses are starting to dip their toes back into the investment pool.
But the big bump from Australia’s re-opening economy will gradually ease from here; particularly as emergency government assistance continues to fall away
Central to the speed of the recovery will be the ongoing tug-of-war between virus mutations and vaccinations. Even with some delay in vaccination, most of Australia’s economy looks on course to be close to pre-pandemic normal by Christmas 2021.
Across the states and territories, however, the impact of COVID has been more varied.
The smaller ones have already achieved the bulk of their recovery from COVID, boasting economies that are bigger than when the pandemic hit. Be impressed: each of the ACT, Tasmania and Western Australia have equalled or bettered the performance of China, which was the fastest growing national economy across the globe through 2020. At the other end was Victoria, which faced the pain of extended lockdowns and outbreaks.
But going forward, the gap between the best or worst performing states is set shrink. Indeed, those that fell the furthest last year are on track to be the fastest growing this year.
Relative output performance (change on year earlier)
The success of NSW’s front line of defence – its COVID tracking and tracing – has been world class. That’s kept businesses open and families spending. And although soaring house prices will eventually bite Sydney, pricing it out as an option for many, it helps near-term recovery. But the costly lack of migrants, foreign students and tourists looks set to linger.
Victoria’s economy suffered much more than any state or territory during COVID, and so the withdrawal of JobKeeper and other supports is a bigger problem for it. But its recovery has already been remarkable, and it will likely grow faster than any other state through 2021 – as it still has much more catch up potential than the others.
Queensland’s striking success against COVID came at the cost of state border closures and the related loss of jobs. Taxpayers helped to pay for that, but from now it’s mostly up to vaccines to keep borders open and tempt Australians back into domestic travel. Making that happen will be vital for Cairns and the Gold Coast in particular.
SA jumped out ahead of the virus, getting its unemployment rate down fast. However, China’s trade bans are hurting, and it looks like a long wait until international borders allow migrants to help stem the impacts of an ageing population.
WA is looking strong thanks to robust iron ore prices and its successful hard border policy (which comes at less cost to WA than it does to other states). However, the West’s recent growth will likely slow, with much of its recovery from COVID already banked.
Tasmania’s economy navigated 2020 better than any other state thanks to success in crushing COVID numbers and in surfing the generosity of federal taxpayer support. But it has probably already seen the best of its recovery – taxpayer support is fading, and further growth may be more of a grind than it’s been so far.
The Northern Territory got on top of COVID fast, and then did the rest of the nation a favour with Howard Springs. The good news is that the recovering world economy may ignite mining and energy developments. The bad news is that, outside the Barossa gasfield, there’s not all that much that looks likely to start any time soon.
Big spending by the federal government supported Australia through COVID, and so the ACT’s public service got bigger. In fact, the ACT often outperforms during recessions thanks to its government strengths. But that’s rather less good news in the national recovery phase, and Canberra’s recent economic success is already starting to come back to the pack.
David is a macro economist with extensive experience in applied economic and quantitative analysis of the Australian economy, along with considerable experience in labor market analysis. David is a regular commentator on macroeconomic trends, and prepares a weekly economic briefing newsletter.
Harry joined Deloitte Access Economics in January 2017 after completing a Bachelors of Arts and Commerce, with honours in Econometrics and Business Statistics from Monash University. Harry’s area of focus is data analytics and econometric modelling, having conducted a range of research surrounding mental health, prescription drug use, labour markets and ageing populations.