Global ratings agency Moody’s has joined the Commonwealth Bank in cutting its growth forecasts for the Australian economy this year.
But the ratings group instead sees a strong pace of expansion in 2021.
Moody’s blamed the lockdowns in Victoria for the gloomier view of 2020 GDP growth.
“We expect Q3 activity in Australia to remain depressed because of new lockdown measures in Victoria,” the firm said yesterday.
Moody’s said on Wednesday that it saw activity in the Australian economy remaining “depressed” through the September quarter.
In an update to its global macro forecasts, the company sliced its expectations for Australia for 2020 from a contraction of 4.9% to 5.3%.
This larger contraction is forecast to be offset by a larger jump in activity next year. In June, Moody’s tipped the Australian economy to grow by 3.7% in 2021, now it sees a 4.3% rise over the year.
Despite the stronger 2021, the forecasts still point to the Australian economy not returning to its pre-COVID size until at least 2022.
On Tuesday CBA chief economist, Stephen Halmarick said he saw the 0.3% contraction in the March quarter being followed by minus 6% rate in the June quarter (we find out about that next Wednesday in the June quarter’s national accounts) and then a minus 0.7% contraction September quarter.
The CBA is forecasting the economy to shrink by 4.2% through 2020 (moody’s is more gloomy) and then edge up by 1.8% in 2021. Growth of 2.9% is expected in 2022, with the stronger part of that in the final six months of that year, according to the CBA.
Moody’s is also expecting slightly stronger inflation this year, at 1.4%, but still well short of the Reserve Bank’s 2-3% range. But with the CPI down 0.3% in the year to June, Moody’s must be seeing a surge in quarter on quarter price growth over the September and December quarters.
Moody’s sees unemployment averaging 8.5% this year and around 7%. The Reserve Bank sees a jobless rate of around 10% by year’s end (its 7.5% at the moment). The CBA sees a jobless rate this year around 9% by the end of the year and easing to around 8.8% through 2021, a less optimistic view of unemployment than that from Moody’s.
