One is that most economic activity loss was due to necessary social distancing related restrictions. This caused a rapid deterioration in economic activity, as seen in the record decline in Q2 gross domestic product (GDP). It could also mean, though, economic recovery may be more rapid than usual as restrictions ease.
"Despite Australia’s largest economic shock in decades, markets have been quick to bounce back, bolstered by fiscal and monetary policy support.”
So far, economic data outside Victoria has been positive in Q3. To get an earlier read on the recovery in GDP at a particular point in time, ANZ Research built a high-level Nowcast model for GDP growth, which uses a variety of inputs.
As the crisis phase of the pandemic passes, the indicator should provide an early read on how GPD is shaping up.
Strong recovery in markets
Despite Australia’s largest economic shock in decades, markets have been quick to bounce back, bolstered by fiscal and monetary policy support.
ANZ Research’s Market Valuations Index (MVI) for Australia, which comprises a variety of forward looking financial market variables, suggested by the end of June markets were looking through what was expected to be a very large decline in GDP.
According to the MVI, markets are positioned for a relatively quick recovery – quicker than ANZ Research envisaged. ANZ Research anticipates the level of Australian GDP to sit below pre-pandemic levels till late 2022. So far, though, since the record collapse in GDP in Q2, much of the data have been better than expected.