COVID 19 remains the main risk to the global economic outlook, while in Australia the key risks to our forecasts remain the timing and pace of the easing in restrictions, and further out, the underlying pace of growth as the impact of policy measures fades.

Due to lockdowns, we expect to see a large hit to activity in Australia in Q3. Our global growth forecast for 2021 is marginally weaker this month, 6.2% compared with 6.3% previously.

Friday was all about US payrolls and the report did not disappoint. Along with solid employment gains, there were improvements in the other metrics of the US labour market edging us one step closer to a Fed tapering announcement. Market reaction to the data saw the UST curve bear steepened with the 10y UST Note testing 1.30% while the USD ended the day broadly stronger.

COVID-19 remains the most significant risk for our global outlook. While in Australia, the current virus outbreak in NSW and associated lockdowns/border closures highlights the uncertainty around economic forecasting at present.

High frequency indicators continue to point to a recovery in the global economy in early 2021. In Australia, the economic recovery continues at a brisk pace with forward indicators pointing toward ongoing strength in activity and the labour market, even as some fiscal support is wound back.

Autumn rain lifts EYCI outlook in the short-term.

Rising restrictions to combat a resurgence in the spread of COVID-19 towards the end of 2020 slowed the global recovery but did not derail it. In Australia, the economy continues to recover at a rapid pace.

COVID-19 continues to present some uncertainty around the outlook, particularly with the rollout of vaccines to emerging markets lagging that of advanced economies.

The resurgence of COVID-19 in many parts of the world towards the end of 2020, has had a negative impact on the global recovery. Whereas in Australia, economic activity continues to rebound strongly.

A range of key commodity prices rose in January.

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.

Markets have been buoyed by positive COVID-19 vaccine news, which could correspond with stronger economic activity and demand for commodities next year.

2020-21 on track to deliver above average winter crop.

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