Australia’s economic recovery looks set to continue at a solid clip in the early stages of 2021, building on the strong rebound from the COVID-19 recession.
The Westpac-Melbourne Institute leading index – which indicates the likely pace of economic activity three to nine months into the future – was running at 4.38 per cent in November.
“This is the strongest growth rate in the 60-year history of the measure,” Westpac chief economist Bill Evans said on Wednesday.
This is signalling an annual growth rate above the long-term trend of 2.75 per cent.
Mr Evans said the strength of the index is consistent with Westpac’s recent upgrade to its annual growth forecasts – from minus three per cent to minus two per cent for 2020 and from 2.8 per cent to four per cent in 2021.
The data comes alongside other upbeat figures this week which showed consumer confidence at its highest level for the year and an improving manufacturing sector that is set to strengthen further in 2021.
The Australian Bureau of Statistics latest weekly payrolls report, a prelude to Thursday’s official labour force figures for November, also saw a further strengthening in employment.
Economists’ forecasts centre on a 40,000 increase in the number of people employed during November, after the surprising 178,800 surge in October.
That is expected to keep the unemployment rate at seven per cent, still shy of the 22-year high of 7.5 per cent seen in June.
In the minutes of its December board meeting released on Tuesday, the Reserve Bank said the economic recovery is well under way with employment recovering strongly and the jobless rate unlikely to reach eight per cent as previously feared.
Even so, the central bank is sticking with its view that the cash rate is unlikely to rise in the next three years in what it sees as an “uneven and protracted” economic rebound.
These positive results come as Treasurer Josh Frydenberg puts the final touches to his his mid-year budget review to be released on Thursday.
Economists predict the budget deficit for 2020/21 will show a modest improvement to around $200 billion, compared with the record $214 billion shortfall announced in the delayed October budget.
Treasury’s economic forecasts will also be updated.