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The Recovery Playbook: Outbreaks risk derailing Australia's return to prosperity

April marked an important milestone for Australia, one year on from the main COVID outbreak of 2020. This allows for the comparison of a time of bleak outlook and uncertainty, with one where many economic indicators appear more in line with performance prior to the pandemic.

Prolonged periods of low (or even no) transmission, as well as the vaccine roll-out have allowed the Australian economy to repair much of the damage caused throughout 2020. We are currently facing a further set of outbreaks and lock-downs, which do have the potential to impact consumer and business confidence (and then carry through into spending and other metrics) if they are not swiftly brought under control. Assuming they can however be managed within a limited time-frame, this should leave us looking at a strong second half to 2021, as the global climate also continues to improve.

Focusing in on the current quarter, consumer confidence hit a new peak, with consistent growth since September 2020. April in particular recorded a 57% YoY increase (against the weakest 2020 score of 75.6). While the June result is likely to have weakened somewhat, our expectation is that it will remain well above the levels seen through much of 2020.

Consumers also remain comfortable taking on increasing amounts of housing debt, driven by the Reserve Bank of Australia’s stated goal of keeping interest rates at record lows over the medium term. This is clearly reflected in consistently property listing numbers, with demand significantly outstripping supply. Off the back of this, residential building approvals are up over 40% from last year, as consumers facing increasing challenges around housing availability or affordability look to renovate an existing property instead.

Business confidence has also remained at consistent highs since January, with minimal monthly variation. The most significant YoY change was again in April, with the 2021 score 63% higher than the comparable period in 2019. Interestingly, we are not merely witnessing higher levels of confidence compared to the COVID outbreak. Figures through 2021 have remained at or around 120, putting them well above the scores recorded in early 2020 prior to the outbreak.

This confidence is underpinned by ongoing strong performance in retail, with all categories remaining largely stable through 2020 and 2021 (except for the lockdown period in April and May). Despite ongoing disruptions, turnover for cafes, restaurants and takeaway food remains strong, while clothing, footwear and personal accessories have successfully transitioned to a higher proportion of online sales, as against bricks and mortar. This spending is likely to remain strong while international borders remain closed, with many Australians shifting the disposable income that would have been expended on travel into retail.

Reflecting this strong business performance, following the sharpest spike in almost two decades, unemployment has then also consistently decreased from its peak in mid-2020. February 2021 saw unemployment fall back below 6%, with the April result approaching pre-COVID levels. This can be largely associated with high business confidence and more consistent retail spending. Given the current outlook, unemployment should remain steady within the mid-low 5% range through 2021.

In summary, it is evident that 2021 has been a year of recovery for most sectors. Australia’s ability to largely manage the impact of COVID-19 has empowered the economy to bounce back faster than might otherwise have been the case. Based on recent trends (and assuming the current outbreaks can be contained), it can be expected that these indicators will remain strong as the country gets back on track, with further improvement likely as the vaccination rate increases, and we look to a more significant level of re-engagement with our international partners.If you’ve got any questions, or would like more information about new vehicle sales in Australia, please get in touch with our team of experts.

Access the COVID-19 Recovery Playbook

Topics: Market Research Financial Services Automotive Research Thought Leadership Research automotive trends vfacts Consumer Confidence