Australia’s economy is well-positioned to “weather the effects of Russia’s invasion of Ukraine,” according to the Pre-Election Economic and Fiscal Outlook released by the federal treasury this week.
The PEFO, which must be released within 10 days of the issue of writs for a general election, says that Australia has limited trade exposure to Russia and current record prices for export commodities mean that Australia’s income will rise in the short term.
Treasury’s analysis warns, however, that increases in oil prices are resulting in higher petrol costs as well as higher prices for other consumer goods.
Concerns about the impact of war between Russia and Ukraine are only one aspect of the document, which says the parameters used to present the forecast and outlook are the same as those factored into the federal budget released in March.
Real gross domestic product is set to grow by 4.25% during the 2021-22 financial year. This growth is being attributed to an increased number of jobs and the bounce back from the pandemic that is being observed within the private sector.
Treasury expects to see GDP growth of 3.5% during 2022-23 and two and a 2.5% GDP growth in 2023-24.
The pandemic has had economic consequences for Australia but the treasury analysis says that Australia’s economy has proven to be resilient.
“Output and employment are both back above pre-pandemic levels, with Australia avoiding the labour market scarring experienced in some other advanced economies,” the forecast and outlook analysis says. “Recent indicators suggest that Omicron is having a relatively limited impact on economic activity.”
Treasury has attributed the lack of impact of Omicron on economic activity to high vaccination rates and the way in which people are adapting to coping with the virus. The PEFO says that new variants of the coronavirus can pose a downside risk to the economy if they were to take hold.
The global outlook is described as highly uncertain as a result of Russia’s invasion of Ukraine, the PEFO says, and the conflict is causing inflation, dampening the confidence of investors and businesses, and exacerbating supply chain disruptions. The war in Ukraine is expected to reduce global growth by three-quarters of a per cent in 2022 and global inflation is expected to increase by 1.5% during the same period.
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