Australia hails faster economic recovery as COVID-19 outbreak suppressed

SYDNEY: Australia's economy will recover from its first recession in three decades faster than previously anticipated after containing the spread of COVID-19, the government projected on Thursday.

Updating the budget outlook, Treasurer Josh Frydenberg said the country's A$2 trillion ($1.5 trillion) economy will grow 4.5% in 2021, up from a previous estimate of 4.25% made just two months before.

Unemployment, which effectively peaked above 10%, will recover to pre-COVID-19 levels of around 5.25% within four years, he said.

"Australia's economic recovery from the COVID crisis is now expected to be faster than our recovery from previous recessions," Frydenberg told reporters in Canberra. The rosier economic projections come after Australia's conservative government unleashed A$300 billion in emergency stimulus to support activity through a COVID lockdown.

Much of the fiscal spending came via the government's wage subsidy programme to counter rising unemployment, With most states and territories removing most social distancing curbs, Australia's annual budget deficit will be smaller than previous expected - though still at a record.

Frydenberg said Australia's budget deficit in the year to June 2021 will total A$197.7 billion, down from the October projection of A$213.7 billion.

Adding to the tide of stimulus, the Reserve Bank of Australia (RBA) has slashed interest rates to near zero and launched a A$100 billion bond-buying program, saying creating jobs was a "national priority."

The lockdown that began in late March, tipped the economy into its first recession since the early 1990s, breaking one of the world's longest growth streaks.

Yet it also largely succeeded in containing the virus, allowing economic growth to rebound by 3.3% in the September quarter. Figures out Thursday, showed the unemployment rate unexpectedly dropped to 6.8% in November, as 90,000 new jobs were created.