RBA: Economy will contract by around 10% in the first half of 2020 – Westpac

FXStreet reports that analysts at Westpac Institutional Bank note that the Reserve Bank Governor has provided the Bank’s first forecasts during this crisis.

“The economy will contract by around 10% in the first half of 2020 with most of the contraction centered around the June quarter. Westpac forecast contraction of -0.7% in the March quarter followed by -8.5% in the June quarter.”

“The Governor forecast that the Australian economy would contract  by 6% in 2020 compared to our forecast of minus 5%. We forecast a growth “bounce back” of around 5% in the second half of 2020, centered mainly on the December quarter.”

“We do differ on the pace of growth in 2021 with the RBA expecting a spectacular 6-7% in 2021 whereas we expect around a 4% recovery with the economy still being smaller by around 1% by the end of 2021 compared to the beginning of 2020.”

“We forecast that the unemployment rate was likely to fall to 7% by year’s end but remain above 6% in 2021. The Governor concurs noting ‘the unemployment rate will remain above 6% for the next couple of years’. We agree but expect that if the RBA achieves it’s 6-7% growth forecast in 2021 then unemployment is likely to fall somewhat below 6%.”