The ongoing state lockdown is “unlikely” to cause two negative quarters of economic growth, according to Reserve Bank of Australia (RBA) governor Phil Lowe but that is dependent on people getting the COVID-19 vaccine.
Speaking in the House of Representatives to the Standing Committee on Economics, Lowe was asked by chair Tim Wilson on the economic impact of the lockdowns.
There were currently lockdowns in place in Greater Sydney, Melbourne and Greater Brisbane and household consumption was 15% lower when people were locked down.
He said the September quarter would be likely to see a decline in gross domestic product (GDP) but that unaffected areas were helping to see positive activity and the economic recovery would begin “well before the end of the year”.
Lowe said: “We are unlikely to have two quarters of negative GDP. By the end of the year, we will have more people vaccinated, lockdowns will have been lifted and restrictions will have eased and then the economy should be in recovery.
“We just need to have a little bit of opening up by October to see a difference in economic activity. I can’t rule out having two negative quarters but it is quite unlikely.
“It is important not to lose sight of the fact that not all of Australia is affected. Significant parts of the Australian economy are still on the positive trajectory that was in place before the recent outbreaks. This is quite different from the situation in the first half of last year, when the whole of Australia was in lockdown. So, it is a mixed picture.”
Meanwhile, he said he was unconcerned about rising inflation in Australia. There had been much speculation on this theme as inflation in the US had risen to more than 4%, its highest rate since 2008.
“I am not concerned about inflation in Australia, wage growth is likely to remain below 3% for the next few years which makes it difficult for us to see inflation problems occurring,” Lowe said.