In an address held on Friday (7 August), the Reserve Bank of Australia’s (RBA) assistant governor, Luci Ellis, issued an update on the central bank’s outlook for the Australian economy in light of recent developments amid the ongoing COVID-19 crisis.
Ms Ellis noted that the recovery is expected to be “slow and uneven”, with GDP to take “several years to return to the trend path expected prior to the virus outbreak”.
Among the scenarios discussed by Ms Ellis was the RBA’s outlook for dwelling investment, which she said has been further impact by newly imposed lockdown measures in Victoria, a sharper deterioration in labour market conditions and “more generalised uncertainty weighing on people’s decisions to buy homes”.
Ms Ellis added that prolonged restrictions on overseas migration would also hinder dwelling investment activity.
“Demand will also be reduced during the period that international borders are closed, because population growth will be significantly lower,” she said.
The RBA assistant governor said the federal government’s HomeBuilder scheme would “provide some countervailing support in the near term”, particularly for detached housing construction.
The full stimulatory impact of the HomeBuilder scheme is not expected to be felt until the back end of 2020, when the bulk of construction projects are due to commence.
Ms Ellis’ address follows Treasury’s decision to revised its forecasts for the Australian economy in response to the economic impact of new COVID outbreaks in Victoria.
In media conference held on Thursday (6 August), the Prime Minister revealed that additional restrictions in Victoria are estimated to cost the real economy by between $7 billion to $9 billion over the September quarter.
According to Mr Morrison, the Victorian economy is expected to bear 80 per cent of the cost ($6-7 billion), with the remainder representing a “preliminary estimate” on the broader impact on confidence in other states and territories and “supply chain impacts” from industry shutdowns in Victoria.
Treasury also revised its forecast for the unemployment rate, from a peak of 9.25 per cent to 10 per cent.
The effective unemployment rate is also expected to hit the “high 13s”, with an increase in effective unemployment of between 250,000 to 400,000.
In response, the federal government has committed an extra $15.6 billion into the JobKeeper scheme and will revise eligibility requirements to cushion the blow of the Victorian restrictions.