3 March 2021
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Australia’s a top global grower!

Peter Switzer
27 January 2021

The International Monetary Fund has upgraded world and Australian economic growth for 2021, which hoses down fears that the stock market surge and house price recovery aren’t straight out of La La Land.

The AFR tells us that “the IMF’s growth estimate for 2020 has also been substantially upgraded by almost a full percentage point due to a stronger-than-expected recovery in the second half of last year in many countries, including Australia.

The world economy isn’t expected to be back to pre-Coronavirus levels of activity until the end of 2022.

Here are the numbers:

  • 2021 global growth will be 5.5%.
  • Advanced economies will grow by 4.3% in 2021 — that’s 0.4% higher.
  • 2022 global growth will be 4.2% and that’s unchanged.
  • 2020 has been reduced to a smaller 3.5% contraction of world growth.
  • Australia’s contraction is tipped to be only 2.5%.
  • We’ll be back to our pre-Coronavirus growth and job creation levels this year but Japan and UK will have to wait until 2022-23!

The gamechanger for the world economy is the earlier-than-expected arrival of vaccines but Australia’s competitive advantage over most countries of the world has been our taming of the infection and death rates.

For a bunch of so-called Aussie larrikins, the fact that we’ve been behaving like goody-goody two shoes, who have largely followed the rules, has paid off in spades.

The fact that the IMF thinks our economy will be back to pre-Coivid-19 levels by this year (while the rest of the world has to wait until the end of 2022 and the likes of the UK and Japan not until 2023) screams loud and clear that our leaders have done a good job, even if you think they could’ve done better on a comparative basis.

The lesson of 2020 has to be that if you gamble against this damn virus, it will come back to bite not only the population of the country but the economy as well.

Today the UK Prime Minister, Boris Johnson has taken responsibility for the 100,000 deaths in the UK. You can understand how that happened when you read this first paragraph from The Guardian’s Marina Hyde: “It’s been encouraging to hear for yonks now that this idea of quarantining overseas arrivals in hotels will finally get around to being discussed at today’s meeting of the government’s Covid-O committee. The O stands for “Oh my God, I hate Mondays, let’s sack it off till Tuesday instead”. I know none of us wishes to come off as impatient, but what are we actually doing here – trying to give the new variants a sporting chance?”

The poor old Poms are looking at isolating virus-carrying travellers now! As someone who loves the UK and has friends there that I’d love to catch up with, you have to hope they lift their game and get on top of this virus ASAP.

In contrast, these great infection and death rates here will help economic growth, job creation company profits, stock prices, super returns and justify the house price rises we’re currently seeing. And the future is looking even better!

“The Reserve Bank of Australia is expecting house prices to surge by 30 per cent during the next three years because of record-low interest rates,” the dailymail.co.uk reported on January 17. “Despite the Covid recession, national house prices rose by 3.7 per cent in 2020, with values in regional areas soaring by 7.1 per cent, CoreLogic data showed.”

If there is a silver lining in this terrible black cloud called the Coronavirus, it’s the calibre of our national and state leadership, which has helped us contain deaths and the rate of infection, and set us up for a strong couple of years.

On June 15 I wrote a piece entitled “Could this Coronavirus crash turn into a Roaring 20s boom? The suggestion came from Morgans economist Michael Knox. I’m glad I’ve picked the right economic number cruncher to believe in!

Since then, the stock market is up 19%. And given what we’re seeing now, over the course of 2021, those invested in quality shares should have a damn good year.

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