Global GDP will contract by 4.5 per cent in 2020 before inching back to 5 per cent in 2021, while economic growth in Australia is projected to fall by 4.1 per cent – an improvement of almost 1 per cent from the outlook in June.
“Australia approached this crisis from a position of economic strength,” said Treasurer Josh Frydenberg.
“The federal budget returned to balance for the first time in 11 years which underpinned our capacity to respond to this unprecedented shock with more than $300 billion in economic support.”
Australia has come out on top of a number of other advanced economies, including the UK (a 10.1 per cent contraction), France (10.5 per cent), and Germany (5.4 per cent). But the OECD warned that measures to control further outbreaks of COVID-19 were continuing to weigh on the recovery in Australia and abroad.
“The OECD also sends a warning that ‘localised lockdowns, border closures and new restrictions being imposed in some countries to tackle renewed virus outbreaks are likely to have contributed to the recent moderation of the recovery in some countries, such as Australia’,” Mr Frydenberg said.
“Put simply closed borders cost jobs and put the economy in a weaker position to recover. Only by working together will we beat this virus and ensure that our economy comes out stronger on the other side.”
The issue of border closures has weighed heavily on the federal government’s ability to plot a route out of the recovery, with Victoria’s renewed restrictions throwing Treasury’s predictions off by a country mile.
“Even since we put this (economic update) to government, things have deteriorated in a major state,” Treasury secretary Steven Kennedy told the Senate COVID committee in July, adding that border restrictions in Queensland and continuing lockdowns in Victoria will mean “growth will be lower, employment will be lower and unemployment will be higher”.
“People can lose confidence and have concerns about what they’re seeing unfolding, even in other parts of the country,” Mr Kennedy said.
“The community having confidence in the virus being well managed will matter enormously for economic activity.”
