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With the earlier than expected easing of some restrictions economists at Westpac have brought forward the timing of the forecast recovery but still expect the Australian economy to contract by 4% in 2020.

Read: AUD/USD extends correction to 0.6950 amid simmering Australian-China tensions

Key quotes

“We are forecasting a contraction in the June quarter of 7% (revised up from -8.5%) pushing Australia into its first recession since the first half of 1991.”

“With evidence of an earlier than expected easing in restrictions we have rebalanced somewhat our forecast growth profile to: -0.3% in Q1; -7.0% in Q2; +1.5% in Q3 and +2.0% in Q4. Through the year the economy is now forecast to contract by 4% with a contraction of 7.3% in H1 and growth of 3.5% in H2. The growth profile in Q3 and Q4 has been revised from -0.6% and +5.2% to reflect the earlier than anticipated easing of restrictions.”

“For 2021, we now expect growth of 3%, down from 4% reflecting our key constraint that the economy is still expected to be operating below its December 2019 capacity (by 1.1%) in December 2021.”

“The unemployment rate is expected to fall to around 8% by September 2020 (from 9% in June 2020) and hold there in the December quarter despite the expected lift in growth in H2 of 3.5%.”

 

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