Review and Outlook of Australia’s Economy for 2020 and 2021

Many personal 2020 goals didn’t pan out as expected. Many thought that this year would significantly bolster economic growth for Australia. However, the year started badly with severe drought leading to the worst bushfires to date. Just as the bushfire crisis was de-escalating comes a new global dilemma – the coronavirus pandemic.

The pandemic caused a massive health emergency across the globe claiming at least 1.5 million lives. It dreadfully led to the shutdown of different industries, as many Aussies shelter in place. This economic downfall is the biggest since the end of WW2. Over the last couple of months, many people were unemployed while inflation rate continued to plummet.

As we open the new year, it’s interesting to note that the result for economies hasn’t been the worse as many analysts and personal financial advisors feared in their earlier forecast. Across the country, we see positive developments, including:

• Streamlined and strict health protocols adhered to
• A prompt fiscal response that motivates businesses to thrive in a new and interesting market;
• Public and private sectors working hand in hand to expedite solutions for everyone;
• Transparent and rapid vaccine developments, and;

All of which enabled economic activity to recover faster than anticipated, which also led to investment markets performing better than expected.

2021 Outlook: What to Expect

With the world recovering from the coronavirus pandemic, most personal financial advisors foresee better economic growth in the country as well as the rest of the world. This phase will significantly impact the investment markets.

While uncertainties remain on vaccine rollouts, the process will be accelerated to cater to the most vulnerable. More importantly, different forecasts show that by the end of 2021, the world will be approaching a degree of herd immunity.

For this year’s economic growth in Australia, the combination of vaccines, policy stimulus, and pent-up demand drives the cyclical rebound of an estimated 4.5% in GDP. Overall, different industries are expected to boom with housing prices rising in this year’s early quarter. Equity markets will likely rise with more accommodating interest rates to support valuation.

Investment Opportunities: The Start of a Quality Cyclical Growth

The best investment to add into your portfolio is the high-quality growth stocks that can benefit from a low-growth, low-inflation and low-interest-rate world. This allows banks to keep policy rates near zero for longer periods. Medical sectors and health-related businesses continue to see excellent profits over time. Many personal financial advisors would suggest their clients invest in these industries because of their stable returns.

Bottomline

Everyone is cautiously optimistic towards Australian equities in 2021 as the economic growth improves. The Australian share market has supportive valuations, which means equities are expected to trade meaningfully higher, and returns will be evenly distributed across all sectors and income levels. Bond yields are also estimated to creep higher without undermining the economic recovery or equity market valuation. As for alternative assets, they will play a significantly important part in a diversified portfolio due to high return expectations.

Want to kickstart the year right? Plan your finances and talk to Financial Services for Life’s lifetime financial advisors for a one-off financial advice. Get in touch with us today!