In an update regarding the economy, the central banker said he expected GDP to fall 6% this year.
However, if restrictions were eased by the middle of this year, this would pave the way for GDP growth of 6-7% in the following year, beginning this September.
“We could expect the economy to begin its bounce-back in the September quarter and for that bounce-back to strengthen from there. If this is how things play out, the economy could be expected to grow very strongly next year, with GDP growth of perhaps 6-7%, after a fall of around 6% this year.”
The speed of this recovery would depend on when the restrictions in place for COVID-19 would be lifted and the change in people’s travel and work plans.
“We should not be expecting that we will return quickly to business as usual. The twin health and economic emergencies we are experiencing will cast a shadow over our economy for some time to come.
“Even after the restrictions are lifted, it is likely some of the precautionary behaviour will persist. In the months ahead, we are likely to lose some businesses, despite best efforts, and some these businesses will not re-open.”
For other macroeconomic factors, unemployment would remain above 6% ‘over the next couple of years’, although it had been helped by the JobKeeper measures, and inflation would also remain below 2% for the next couple of years.
Lowe forecast unemployment, one of the biggest consequences of the pandemic, would be around 10% in June 2020 while total job hours would decline by 20% in the first half of 2020.
“I am hopeful that it might be lower than this if businesses are able to retain their employees on lower hours. The unemployment rate would have been much higher than this without the Government’s JobKeeper wage subsidy.”