The fundamentals are always awfulJun 10, 2020
Australia leads rebound
The OECD reported in its latest update that Australia may effectively be leading the developed world out of recession, although there will be a heavy dependence on the government continuing to spend and support the economy beyond the next few months.
With the domestic spread of COVID-19 broadly contained and a stronger push to reopen state borders, it’s possible that Australia’s unemployment rate may peak in the 7 to 8 per cent range, rather than scaling the alarming double-digit levels previously feared.
Output could drop by about -5 per cent in 2020, before rebounding by around +4 per cent in 2021.
Despite this upbeat assessment, overall it seems unlikely that the economy will experience a smooth V-shaped recovery.
Downturns and recessions tend to leave lasting scars, while the Royal Commission and a more cautious environment may shrink the ‘bezzle’, that illusory increment to wealth experienced during the good times.
It’s evident from any walk around town how many businesses have been permanently shuttered during the effective lockdown, and the economy will likely take some years to heal in full.
For all of that having been said, the fundamentals are always apparently awful, and this doesn’t mean it’s a bad time to begin building wealth for your future by formulating a plan to invest or by building a business.
I discussed these ideas a little further in the short video here
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