An OECD report has revealed a grim global economic outlook, but a predicted GDP contraction of some 5 to 6.3 per cent has put Australia ahead of the pack, including the US, New Zealand, the UK and Japan.
Noting that Australia’s economic output will likely contract by 5 per cent in the absence of a second outbreak, the OECD noted that there is “ample” fiscal space to support the economic recovery as needed.
As such, it has forecast the GDP to rebound strongly next year, expanding by 4.1 per cent in a “single-hit scenario” or 1 per cent if a second wave is realised in the course of 2020.
The intergovernmental economic organisation has, however, opined that Australia must be careful not to withdraw programs such as JobKeeper too early, advising the government to also consider new measures to reduce unemployment.
“Some income support measures may need to be extended beyond their September expiry date,” the OECD said.
Noting that Australia’s fiscal space allows for a strong response to a possible second outbreak, the OECD has urged the government to mull over the extension of the SME Loan Guarantee Scheme to further spur economic growth.
“Expanded loan guarantees, coupled with accelerated insolvency processes, could reduce scarring for entrepreneurs and facilitate a more dynamic recovery,” the OECD said.
“The authorities should also ensure that the social safety net is adequate and consider further investment in energy efficiency improvements and social housing.”
Commenting on the OECD report, the Treasurer told media on Thursday: “The positive news for Australia is that Australia stands out as a leader in the economic recovery.”
Asked whether the government was prepared to heed the OECD’s suggestions, Josh Frydenberg gave a common response, refusing to predict the outcomes of the JobKeeper review.
“JobKeeper is supporting more than 3 million workers across the country, it’s helping to maintain that formal connection between employer and employee, and it’s complementary to our other support measures… So, I don’t want to pre-empt the outcome of that review and decision that the government will take,” Mr Frydenberg said.
The Treasurer did, however, urge the states to reopen borders, explaining that “closed borders cost jobs”.
“The states should go the full hog. They should lift those borders immediately,” the Treasurer said.