Colin Brinsden, AAP Economics and Business Correspondent
(Australian Associated Press)
The Australian economy is expected to enjoy strong growth throughout 2021 as it extends the recovery from the coronavirus recession.
But the Organisation for Economic Cooperation and Development (OECD) has warned this rebound is at risk without widespread COVID-19 vaccinations.
In its latest outlook, the OECD expects the Australian economy to grow by 5.1 per cent this year, driven by domestic demand and supported by a strong labour market and surging housing prices.
Private investment will also be buoyed by government incentives and low borrowing rates.
The OECD expects growth of 3.4 per cent in 2022, which would still be comfortably above the long-run trend of around 2.8 per cent.
It also predicts the unemployment rate to fall further to five per cent next year compared to its existing level of 5.5 per cent.
“Nonetheless, COVID-19 restrictions continue to constrain some parts of the economy and insolvencies will rise from their current low levels” the OECD said.
“Without widespread vaccination, the economy is vulnerable to a sizeable outbreak and accompanying restrictions, and delays to skilled migration could crimp growth.”
The Paris-based institute also warns that an appreciating Australian dollar, trade tensions with China and travel restrictions will continue to weigh on exports.
It says both the Reserve Bank and the federal government must be be ready to provide further support should the recovery falter, and targeted support may also be needed where international border closures have the biggest impact.
On taxation, the OECD again called on more states and territories to replace taxes and fees on property transactions with a recurrent land tax to promote mobility and more efficient property use.
It also believes further increasing renewable energy, boosting the take-up of electric cars and improving co-ordination of climate policies across governments would help Australia progress towards its Paris Agreement targets.
OECD’S KEY ECONOMIC FORECASTS FOR AUSTRALIA
Gross Domestic Product (economic output)
2021 – 5.1 per cent
2022 – 3.4 per cent
Consumer Price Index (inflation)
2021 – 2.0 per cent
2022 – 1.7 per cent
2021 – 5.5 per cent
2022 – 5.0 per cent
(Source: OECD Economic Outlook)