NAB’s World on Two Pages – December 2020

Globally GDP rebounded strongly across all the major advanced economies in Q3, however the spread of COVID-19 remains a key risk to the outlook. In Australia our outlook now resembles the best-case scenario we outlined at the start of the pandemic, although large uncertainties remain, even with a vaccine seemingly close to being rolled out.

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Global

GDP rebounded strongly across all the major advanced economies in Q3, but the pace of recovery is expected to slow markedly, and in some cases there may be a reversal, in Q4 due to the re-introduction of restrictions to control COVID‑19. There was also a sizeable economic recovery in Emerging Markets in Q3, and more timely data point to a continued improvement in economic conditions in Q4. The spread of COVID-19 remains a key risk to the outlook. Despite the impact of the COVID-19 related restrictions in Europe and elsewhere, the global PMI survey showed relatively little change in November, with the services reading easing a little but manufacturing up, pointing to the global recovery continuing. Nevertheless, we expect there to be a slowdown in the global recovery in Q4 2020 (with downside risks around Q1 2021). Ongoing economic disruption is likely until an effective COVID-19 vaccine has been widely deployed. On this front, news continues to be positive, supporting financial markets. Our global forecast for 2020 is unchanged at -3.9% but we have lowered our forecast for 2021 to 5.8% (from 6.1%).

Australia 

NAB recently upgraded our forecasts prior to the Q3 national accounts to expect a stronger near-term recovery in activity and a lower peak in unemployment. Driving our change in view has been the continued strength in NAB’s transactional data and the solid turnaround in business conditions and confidence recorded in the NAB survey. Our outlook now resembles the best-case scenario we outlined at the start of the pandemic. That said, while we expect activity to return to pre-virus levels by the end of 2021, it will take years for unemployment to recover, even in this best-case scenario. Further, large uncertainties remain, even with a vaccine seemingly close to being rolled out. As such, federal and state fiscal support will be key for a sustained recovery, while monetary policy will assist, at the margins, by keeping the cost of credit low.

This month NAB Group Chief Economist Alan Oster has recorded a podcast, giving you a 10 minute summary of the latest economic news.
Listen to the full podcast now. If listening on a mobile device, click listen in browser. Alternatively, read NAB’s World on Two Pages December 2020 report