For Australia the Q3 national accounts showed a smaller hit to activity than we had expected but we continue to see a very strong snap back in activity in Q4. Globally, advanced economy growth was robust in Q3, and a similar outcome is expected in Q4 albeit with a shift in the source of growth away from Europe towards the US and Japan.
Advanced economy growth was robust in Q3, and a similar outcome is expected in Q4 albeit with a shift in the source of growth away from Europe towards the US and Japan. The global composite PMI remained robust in November, but with stronger readings in advanced economies than emerging markets. Our global growth forecast for 2021 is marginally weaker at 5.6%. The global recovery is anticipated to continue into 2022 with growth of 4.4% expected (revised from 4.5%) while in 2023 we expect growth of 3.6% (previously 3.5%) which is around its long-term average. At the time of writing, it appears that the Omicron variant is more contagious than earlier variants, but the threat it poses to the outlook will depend on the combination of transmissibility/virulence and vaccine effectiveness which remains unclear.
The Q3 national accounts showed a smaller hit to activity than we had expected but we continue to see a very strong snap back in activity in Q4. With GDP rising 2%, we see the losses from the virus this year fully recovered by end 2021. A very strong rebound in the labour market is underway with the jobs lost since June more than recovered in November alone. Beyond 2021, we see above trend growth continuing through 2022 (rising 4.1%), supported by rebounding household consumption and further gains in business investment and dwelling construction. Government spending and incentives will also continue to provide support. We see growth returning to around trend pace in 2023. Alongside this, we see the unemployment rate falling to around 3.8% by mid 2023 – its lowest level in decades. This should see wage growth begin to lift and eventually feed through to inflation. While there are a number of uncertainties on the magnitude and speed of this pass-through, by mid-2023 we expect wage growth will have risen enough for the RBA to be confident that inflation will stay within the target band, allowing the Bank to begin normalising the cash rate. From there, we see rates rising around once a quarter, taking the cash rate to about 2% by end 2024.
Australian Financial Wellbeing Survey
Australia’s wellbeing levels fall sharply as lockdowns bite in several states. But financial stress has eased & fewer Australians are experiencing financial hardship.
NAB’s Q3 wellbeing survey reinforces our strong belief in “more than money”. While overall levels of household financial stress and hardship eased, wellbeing levels fell sharply, coinciding with extended lockdowns in much of VIC, NSW, and the ACT. While lockdowns have been an effective means of decreasing the number of new COVID-19 cases, they appear to have taken a toll on the population. Australians were far less satisfied with their lives. Over 1 in 3 of us continue to struggle with “high” anxiety. Wellbeing declined in capital cities, but rose in regional areas.
Wellbeing fell most in Victoria. Low income earners, the unemployed and those who have lost their main source of income because of COVID, are among those with the lowest wellbeing, while home owners continue to enjoy higher wellbeing than renters. Lower income earners also have higher financial stress, especially in their ability to raise $2,000 for an emergency, other monthly household expenses, monthly utility bills and medical bills & healthcare. Around 3 in 10 Australians believe they are worse off financially than at the same time last year. Finally, the number of Australians who think now is a good time to buy a home fell for the third consecutive quarter.
Living well is important to all of us. Wellbeing means being able to cope with the challenges we face and making the most of the opportunities that arise. While money is important, it’s not what matters most. Our wellbeing lies in the connections we share, the relationships we build, our pets, homes, safety and feeling part of our local community. Being in control of our finances also improves wellbeing.
Over 1 in 5 Australians strongly believe that because of their financial situation, they will never have the things they want in life. While wellbeing typically rises as our income grows, especially for those on lower incomes, any increase in wellbeing associated with each dollar eventually diminishes. The importance of money is its ability to help us pursue the life we want for ourselves and those we care most about, and to cope with the more difficult aspects of all our lives. And, our attitudes and behaviours can influence outcomes.