On Tuesday night, the International Monetary Fund (IMF) will update its global growth forecast. It’s expected to confirm the path out of the depths of the slowdown will be slow and stuttering for the global and many national economies.
This will be very handy independent context for the federal government’s confident forecasts for international growth.
In last week’s budget, Treasury forecast global growth next year of 5%, and 3.5% in 2022. In June, the IMF forecast Australia’s 2020 growth at minus 4.5% in 2020 and a rise of 4% in 2021. The budget forecast 4.25% growth for calendar 2021.
In its June update, the IMF forecast global growth this year at minus 4.9%, followed by 5.4% in 2021. It also noted the higher degree of uncertainty around its numbers. If anything, the uncertainty will be even worse now — especially with the confused and bitter US election.
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Surging infections across Europe and what looks like the beginning of a third wave in the United States will further complicate forecasts, with major economies like the UK and France ramping up local lockdowns and again closing or restricting the hospitality industry.
Persistently high infection rates will also continue to hamper tourism and transport, delaying any sustained recovery into 2021.
As Treasury noted in the budget, “there remains a risk that severe health and economic outcomes in a range of countries may put pressure on the global economic and financial architecture, which might lead to credit tightening and financial instability.”
The Reserve Bank (RBA) also flagged the risk of financial instability resulting from the pandemic in last week’s Financial Stability Review.
In that context, at least, Australia’s banks are well-positioned. The RBA notes that Australia’s “banks will remain very well capitalised, not even entering their capital conservation buffers”.
“Even if the economic contraction is substantially more severe under a downside scenario, banks would remain above their minimum capital requirements. Given their strong balance sheets, banks will be well placed to continue lending, supporting the economic recovery and so in turn the Australian financial system.”
Other countries may not be so fortunate.
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Frydebrains Fudget is based on stupid forecasts for growth, WITH POLICIES DESIGNED TO KEEP WAGES ,PENSIONS, DIVIDENDS, INTEREST RATES AND OTHER INCOMES DOWN, AND NO RISE IN THE INFLATION RATE ,THERE IS NO POSSIBILITY OF GROWTH OR INCREASED DEMAND FOR DOMESTIC SERVICES OR GOODS, THE ONLY BENEFACTORS OF THIS IDEOLOGY/POLICY ARE LARGE EXPORTERS AND MULTI NATIONAL MINERAL COMPANIES, THIS FAKE BUDGET, OR FUDGIT WILL CREAT EVEN MORE STAGFLATION AND BRING ON A DEEP AND LASTING RECESSION, THE CONSERVATIVES CANNOT BRING THEMSELVES TO INTRODUCE NATION BUILDING POLICIES THAT INCORPORATE GROWING WAGES AND CONDITIONS FOR AN EXPANDING ECONOMY AS THEY ARE ALL ABOUT CONTROL AND THE MAXIMISING OF THE PROFITS OF THEIR WEALTHY BENAFACTORS AND MEDIA MASTERS.
Following the USA which has handed billions to corporations and banks. Only benefit I see is the rise of stocks on the stock exchange. Otherwise dire situation for many in the USA. We will be the same.
Given that the REAL economy, as it is lived in, differs from that of the econocraps… sorry econocrat… nah, STET… is struggling for oxygen, why does the RBA deem it a “good thing” that “…Australia’s “banks will remain very well capitalised, not even entering their capital conservation buffers”?
If the “money” (another, and more relevant, discussion topic) is STB available the question is, FOR WHOM?
Stock boosters?
Can’t be that as sharemarkets around the OECD (forget China) are only unable to arise further for want of shoulders to climb upon.
Shysters & carpetbaggers?
Again, no shortage of them but even they need to have some snake oil or new clothes to sell to the wannabe emperor(s) rather than the noxious nostrums which have proved well nigh fatal in the past.
Maaates needing a new Rolls pr Maserati?
Reports are that luxury car sales initially went through the roof but now those multi car garages in Vaucluse are now full of toys.
Meanwhile, on the mean streets of the dormitory ‘burbs a restive populace are increasingly unhappy about jam,not so much tomorrow but maybe in 2021/2 but, for sure, sometime.
Glen and Bernard, noteworthy that this week the RBA’s Financial Stability Review effectively gave thumbs up to the ability of major Oz banks to refinance the post covid recovery. Less noted (or obvious) was the ability of the $3 trillion super sector to repeat the role it played in 2008 gFC in refinancing Australian companies. True I have an interest (director of one of the industry funds) but know that the same is likely to happen this time around too.
In March the IMF and World Bank was forecasting a 1% world wide contraction. I questioned that, proffering that if we got away with a 5% contraction we might be lucky. Given that the US, and Europe is now deep in a second wave and a highly contentious election, what is the likelihood of us achieving the minus 4.9% forecast? I’m speculating, not very good.
How is it that I, and no doubt many others, were better forecasters than the IMF. I’m going to suggest that I’m not some one off crazy genius, and perhaps the IMF, is a wholly politically dominated PR machine. They, know, nothing!