Australia is on track to escape the recession, and property prices will return to 2019 levels next year. That’s the bold prediction of a series of experts who have come out and told us what is likely to happen in 2021.
One of Australia’s leading comparison sites, Finder has surveyed 40 financial experts and economists to find out what direction they think 2021 is heading and found it to be overwhelmingly positive.
The recession
When asked about the likelihood of Australia exiting and staying out of a recession in 2021, all 28 experts agreed that this is either “likely” (54%, 15/28) or “very likely” (46%, 13/28).
Commonwealth Bank’s Head of Australian Economics Gareth Aird said Australia’s economic recovery is going to be faster and stronger than previously expected.
Mr Aird said he was “optimistic” about the strength and duration of the economic recovery and said there was “plenty of evidence creeping into the data that signals strong outcomes next year are more likely than not”.
Economists are also optimistic about the nation’s GDP growth, with 79% (22/28) expecting the economy to see its first quarter of growth before the end of 2020.
The property market
When examining the property market, more than 4 in 5 experts (85%, 24/28) predicted that house prices will increase above 2019 levels in the new year, and 79% (22/28) think that sales volumes will recover to match or exceed 2019 levels.
ANZ economists have significantly revised November house price forecasts from a 10 per cent decline to a 9 per cent lift in 2021.
The counterweight of low rates and government stimulus has flowed through to housing construction, approvals and sentiment, ANZ economists Adelaide Timbrell and Felicity Emmett said.
“Our view that house prices would decline around 10 per cent, peak-to-trough, has proven too pessimistic: low rates have trumped factors like elevated unemployment and low population growth,” Emmett and Timbrell said.
Unemployment rates
Westpac’s economic spokes person, Bill Evans has optimistically revised the Westpac 2021 unemployment forecast.
The revised our employment growth forecasts in 2021 have been altered to 2.6% from 1.8% and in 2022 to 2.1% from 2.4%.
The Westpac unemployment rate forecasts have been lowered from 7% to 6% (end 2021) and from 6.3% to 5.2% (end 2022).
Craig Emerson of Emerson Economics said unemployment figures must drop before the cash rate is increased. “The RBA has a new target: it won’t increase the cash rate until actual (not forecasted) unemployment is much lower and actual (not forecasted) inflation is in the 2-3% range. That will be well beyond end-2022,” he said.
An online shopping shift
Ecommerce surged during the pandemic, with more than 8.5 million households shopping online between March and October in 2020 according to Australia Post figures.
Yet over half of the experts (56%, 15/27) believe that the recent uptick in online shopping could signal the end of major bricks-and-mortar department stores like Myer and David Jones.
Graham Cooke, insights manager at Finder, said that Aussie shoppers are becoming increasingly aware of the retail model used by department stores.
“Department stores operate on an old-fashioned regular discounting model, where an item is advertised at an inflated price for several weeks, only then be ‘on sale’ for several more weeks.
“Consumers are becoming annoyed by this false discounting, and they prefer the flat low-cost pricing offered online,” Cooke said.