Australian Economy – Despite a global pandemic, the Australian economy was able to push ahead over the 12 months to April 2021, up about 1.1%. This is not far off the annual growth rate that we experienced prior to Covid-19, highlighting the benefits of having plenty of fiscal firepower to ward off economic perils. Accordingly, the unemployment rate is near 10-year lows and the current account surplus (driven by unbelievably high iron ore prices) is at all-time highs1.
Global Economy – Similarly, the US economy is also just above where it was prior to the Covid-19 outbreak; although, unemployment is still 2% higher. Business confidence in the US has bounced back well, however, consumer confidence is lagging behind. Out of all the major developed economies, the United Kingdom has been the hardest hit economy (owing to the double hit of Covid-19 and Brexit), with GDP still well below where it was 12 months ago1.
Investment Markets – Developed market equities had another good month, with both the Australian and US share markets up above 2%. There is a continuing reversal of markets that outperformed in 2020 (e.g. China, Japan), with such markets giving up gains in June2.
Outlook – In Australia, the boost from iron ore exports is likely to be temporary, with the trade surplus set to normalise over the next 12 months. This should, however, sync up with the reopening of the economy and the RBA's push to get the unemployment rate down below 4% providing the country with a reasonable growth trajectory. As this happens, economists in Australia and around the world will be keeping a keen eye on inflation.
S&P/ASX 200 – 12 months to 30 June 2021
Source: Yahoo! Finance
Footnotes: 1. TradingEconomics; 2. Yahoo! Finance.
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