Australia | Investment recovery driving a stronger outlook

Our June forecasts contained a substantial upward revision to growth in 2021 and 2022. We now forecast growth of 5.3% in 2021, followed by 3.2% in 2022. In the near term, the change in the outlook has been driven by the better-than-expected Q1 GDP print, and the more supportive stance of fiscal policy presented in the May Budget.

Very accommodative policy settings are gaining traction and spurring private sector activity. In particular, we are forecasting a sharp rebound in dwelling and business investment, which will boost activity in the near term.

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• With health outcomes remaining favourable and the labour market recovery ahead of schedule, forecasters have generally revised their 2021 forecasts higher since late 2020.
• Public demand has been a large contributor to domestic demand growth in recent years. But it will wane as a driver of growth moving forward.
• Income support and curtailed spending drove a surge in the savings rate in 2020. As with earlier episodes, the savings rate will unwind only gradually.