The Global Economic Outlook For Australia & New Zealand (2021)
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The Global Economic
Outlook For
Australia & New Zealand
(2021)
Introduction
The COVID-19 pandemic has had a stunning impact on the global economy, and has led to a
permanent shift in the operating landscape for millions of businesses. As of early November
2020, over 47.4 million cases of COVID-19 have been recorded and over 1.2 million fatalities
have occurred globally. At a time when the accelerating spread of COVID-19 is disrupting much
of the developed world, IBISWorld has examined how this historic pandemic has permanently
shifted the global economic landscape.
This report examines how the COVID-19 pandemic has influenced national economies across
the globe, including analysis of GDP, unemployment, consumer sentiment, business confidence,
household discretionary incomes, monetary policy and fiscal spending. It looks at the top five
industries to fly and fall over the next 12 months. In addition, IBISWorld has investigated the
outlook for COVID-19 restrictions and what a return to normal operating conditions will look like.
While COVID-19 may subside if a vaccine is developed and distributed, the economic impacts of
the pandemic will likely continue for years to come.
To get more information about any industry or key economic driver in this report, contact
your Client Relationship manager or log in to My IBISWorld for more information. If you're not
yet an IBISWorld member, please contact us at info@ibisworld.com to learn more about our
subscription options.
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The Global Economic Outlook
For Australia & New Zealand (2021)
Australia | Economic Summary
Real GDP
Australian real GDP is expected to decline by 2.7% in 2020-21, to $1.83 trillion. Although most states
and territories have relaxed lockdown measures relative to 2019-20, several factors are expected to
weigh on GDP during 2020-21. The ongoing lockdown of Victoria in the wake of a second COVID-19
outbreak has continued to hinder the economy, particularly as interstate borders have remained closed
to recreational travel. Many service industries, such as food services, arts and recreation, education and
personal services, are anticipated to continue facing trading restrictions in an attempt to limit further
COVID-19 outbreaks. Negative consumer sentiment has also constrained household expenditure,
further limiting the retail sector.
GDP is expected to recover over the second half of 2020-21, and rebound strongly in the following
financial year. GDP is forecast to grow by 4.7% in 2021-22, to total $1.92 trillion. Pent up demand and
the easing of restrictions on tourism, hospitality, and retail are likely to support growth. In addition,
tourism may begin to recover as governments establish travel bubble arrangements with nations free
of COVID-19, such as New Zealand.
Real GDP is grow at an annualised 2.9% over the five years through 2025-26, to total $2.11 trillion.
Strong monetary and fiscal stimulus is forecast to support a rebound in economic activity. Projected
increases in state government spending will likely boost public sector capital expenditure, particularly
through projects to expand transport infrastructure.
Australia Real GDP Growth and Unemployment
COVID-19 has inflicted a serve and sharp contraction on the Australian economy, causing GDP
to decline by 2.7% in 2020-21
6% 9.0%
5% 8.0%
4%
7.0%
3%
6.0%
2%
5.0%
1%
4.0%
0%
3.0%
-1%
2.0%
-2%
-3% 1.0%
-4% 0.0%
Real GDP Growth (LHS) Unemployment rate (RHS)
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The Global Economic Outlook
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Unemployment
The national unemployment rate is expected to average 7.7% over 2020-21, an increase of 2.06
percentage points over the prior year. The second-wave of COVID-19 in Victoria has resulted in a
surge in unemployment across the state. However, the Federal Government’s JobKeeper program has
reduced the outbreak’s impact on unemployment. Although the economic effects of COVID-19 are
anticipated to ease by the end of 2020-21, federal and state governments are set to reduce assistance
programs, such as JobKeeper. As a result, unemployment is expected to spike.
In 2021-22, the national unemployment rate is forecast to fall 0.98 percentage points, to 6.72%.
The forecast for unemployment and broader economic activity is dependent on the discovery and
availability of a COVID-19 vaccine. Although uncertain, the likelihood of a vaccine being introduced
either prior to or early in the financial year is promising based on current research progress.
Overall, the national unemployment rate is projected to fall at an average annual rate of 0.31 percentage
points over the five years through 2025-26, to 6.17%. The Federal Government has stated that 6.0%
unemployment is the threshold at which fiscal stimulus will begin to wind down. Therefore, Federal
Government spending is forecast to remain high over the next five years, supporting an improvement in
the unemployment rate.
Consumer sentiment
The consumer sentiment index is anticipated to rise in 2020-21, but remain negative overall. Consumer
sentiment is expected to average 94.4 index points in the current year, which represents an increase of
1.3% over 2019-20. Many Australians remain highly uncertain about the economic outlook, particularly
in the wake of the damaging second wave of COVID-19 in Victoria. Concerns about job losses,
falling house prices, and disruptions to the economy are expected to continue to support consumer
pessimism.
Consumer sentiment is forecast to improve by 3.8% in 2021-22, to 98.0 index points. Despite this
improvement, overall sentiment is projected to remain slightly negative. The ongoing effects of the
COVID-19 pandemic are forecast to drive this negative outlook, including continued high unemployment
and Australia’s borders remaining closed to international travel.
Consumer sentiment is forecast to recover gradually over the next five years, as the damaging effects
of COVID-19 subside. Overall, the consumer sentiment index is projected to rise at an annualised 1.5%
over the five years through 2025-26, to total 101.9 index points. A decline in the unemployment rate and
recovering household discretionary incomes will likely drive this revival.
Business confidence
The business confidence index is expected to average -10.1 points over 2020-21, a decline of 2.1
points from 2019-20. Business confidence is expected to remain severely negative in 2020-21, as
COVID-19 restrictions continue to hinder economic activity. Rising trade tensions between Australia and
China have also weighed on business confidence in the current year. Weak margins, high uncertainty,
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For Australia & New Zealand (2021)
and ongoing disruption from COVID-19 are expected to dissuade businesses from investing in new
productive capacity throughout the year.
Business confidence is expected to recover significantly in 2021-22, as businesses benefit from federal
and state governments loosening COVID-19 restrictions. Business confidence rebounded following
the 1991 recession and GFC, and is likely to do the same after the COVID-19 recession. The business
confidence index is expected to rise by 12.0 points in 2021-22, to average 1.9 index points.
Overall, business confidence is expected to increase at an annualised 3.1 points over the five years
through 2025-26, to total 5.5 index points. Weakness in the Australian dollar is expected to support
export-focused industries over the next five years, particularly in the mining and agriculture sectors.
Australia Consumer Sentiment and Business Confidence
Business confidence and consumer sentiment are expected to gradually recover, and become
positive by 2023-24
120 20
115 15
Consumer Sentiment Index
Business Confidence Index
110 10
105 5
100 0
95 -5
90 -10
85 -15
80 -20
Consumer sentiment (LHS) Business confidence (RHS)
Cash rate
The cash rate is expected to average 0.25% in 2020-21, representing a decline of 0.41 percentage
points from 2019-20. The Reserve Bank of Australia has stated that the cash rate will remain at its
minimum bound until both the national unemployment rate and the inflation rate achieve a sustained
recovery. This recovery is unlikely to occur within the next three years, suggesting that a near-zero cash
rate is likely to persist for an extended period. A small decline to 0.1% may occur in November 2020.
The Reserve Bank of Australia has previously stated resistance to dropping the cash rate below 0%,
as negative interest rates are unlikely to have a significant positive impact on the Australian economy.
Instead of dropping the cash rate further, the Reserve Bank of Australia has opted for unconventional
monetary policies such as the Term Facility Funding scheme, asset purchases and yield curve control.
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The cash rate is projected to rise at an annualised 0.17 percentage points over the five years through
2025-26, to total 1.08%. Any rebound in interest rates is forecast to lag behind a recovery in GDP
growth, unemployment, and inflation. The Reserve Bank of Australia has announced a willingness to
allow inflation to run above the 2-3% target for an extended period, in order to ensure a faster rebound
in the Australian economy.
Real household discretionary income
Real household discretionary income is expected to decline by 7.8% in 2020-21, to $499.8 billion. While
the economy is expected to improve over the second half of the year, federal and state governments
will likely scale back fiscal stimulus, which is expected to hinder household incomes. The JobSeeker
Coronavirus Supplement is set to end as of January 2021, returning the fortnightly payment to $565.70
from the $1,115 fortnightly payment reported from March 2020 to September 2020. The Federal
Government is also likely to end other policies, such as the early superannuation access scheme.
However, additional stimulus in the form of tax cuts for middle-income and high-income households
are likely to support average incomes. Household incomes had previously spiked by 8.8% in 2019-20 as
a result of unprecedented fiscal and monetary stimulus.
Household incomes are forecast to increase 2.4% in 2021-22, to $511.9 billion. A recovery in
unemployment and overall economic activity is expected to support a rebound in income growth. Real
household discretionary income is projected to grow at an annualised 1.5% over the five years through
2025-26, to total $538.4 billion. Overall, incomes are forecast to recover gradually but will likely remain
below the peak of 2018-19 over the next five years.
Fiscal support and stimulus measures
The Australian Government has implemented a range of supportive policies to assist the economic
recovery from COVID-19. Combined, these support measures have led to a budget deficit of $213.7
billion in 2020-21, up from $85.3 billion in 2019-20. This deficit is equivalent to 11.0% of real GDP, an
outcome not seen since the end of World War II.
Australia’s response to the COVID-19 pandemic was initially simple and broad-based, in order to quickly
deliver necessary financial support to households. The Federal Government increased the JobSeeker
unemployment benefit from $560 to $1,100 per fortnight, and introduced the JobKeeper wage subsidy
scheme. Through JobKeeper, an employer received a wage subsidy of $1,500 per fortnight for full-time
workers. As Australia has stabilized in the wake of the COVID-19 pandemic, these broad-based support
policies have become more targeted, and have begun to shrink. These measures are expected to be
removed entirely by March 2021. At that time, a spike in unemployment and business bankruptcies is
expected to occur.
The Australian Government has introduced a range of targeted stimulus policies in the 2020-21
budget, released in October 2020. This includes tax reductions for businesses, including temporary full
expensing of eligible depreciable assets for businesses with turnover up to $5 billion June 2022. The
measure will be available to over 99% of businesses, which employ around 11.5 million workers.
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The government has also introduced personal income tax cuts. Around 11.6 million individuals will
receive a tax cut in 2020‑21, compared with 2017-18 settings. For an individual on an income of
$80,000, tax will be reduced by 11.3%, while an individual on income of $180,000 will receive a tax cut
of 4.4%. Taxation cuts are currently expected to expand over the next five years, until around 95% of
taxpayers face a marginal tax rate of 30% or less in 2024‑25.
Other notable stimulus policies include an increase in infrastructure construction, including $14.0
billion for new projects over the next four years. The Government has also introduced the HomeBuilder
scheme, which provides eligible owner-occupiers, including first home buyers, with a grant of $25,000
to build or renovate a home. Six major manufacturing industries have been identified as priorities in
the recovery from COVID-19, and have received $1.5 billion in funding via the Modern Manufacturing
Strategy. These industries include food and beverage manufacturing, clean energy and recycling,
defence, space, critical minerals, and pharmaceutical production.
Growth Industries
A0410 Fishing in Australia
Operators in the Australian Fishing industry have faced significant disruption as a result of the
COVID-19 pandemic, as most of the industry’s output is destined for export markets. The reduction
in air travel has reduced air freight availability, making it difficult for industry players to transport
high-value fresh seafood, such as rock lobster, to export markets. Global economic turmoil caused
by the pandemic has also negatively affected prices, further eroding earnings for fishing businesses.
Consequently, industry revenue fell by 22.5% in 2019-20.
Industry revenue is anticipated to rise by 23.1% to $1.7 billion in 2020-21, as economic conditions
stabilise and industry activity recovers. The Federal Government’s International Freight Assistance
Mechanism was launched in April 2020, and is funded until mid-2021 to support exporters of high-
value and perishable goods. This program is forecast to both support industry revenue growth and limit
freight costs in 2020-21, bolstering industry profitability. Furthermore, recovering demand for Australian
rock lobster from China is anticipated to drive industry revenue growth in 2020-21. As rock lobster
exports to China fell by 29.0% to $502.1 million in 2019-20, improved international freight capacity is
expected to substantially benefit the industry in 2020-21.
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Australia Fishing Industry Exports
Strong export demand for Australian rock lobster has boosted the Fishing industry’s
performance over the past decade.
1400
1200
1000
Million $AUD
800
600
400
200
0
Rock lobster exports Other industry exports
OD5538 Online Food Ordering and Delivery Platforms in Australia
The Online Food Ordering and Delivery Platforms industry is expected to perform strongly over 2020-21.
Industry operators facilitate meal and food deliveries through bookings made on their online platforms.
These platforms connect users of their applications with food-service providers and delivery drivers.
As a result of the COVID-19 pandemic, state-level governments have placed restrictions on food service
providers’ ability to offer services to seated patrons. While the majority of these restrictions have been
lifted, consumer concerns regarding the spread of COVID-19 have increased demand for takeaway
services. Overall, revenue for the Online Food Ordering and Delivery Platforms industry is expected to
increase by 12.1% over 2020-21, to $847.9 million.
While the COVID-19 pandemic has provided operators with a key opportunity for expansion, its
overall effect has been mixed. The outbreak has prompted a sharp rise in the national unemployment
rate, which is expected to reduce discretionary incomes over 2020-21. Takeaway food is generally
discretionary in nature, with consumption correlating with household incomes. Therefore, the forecast
decline in discretionary incomes over 2020-21 is expected to slow revenue growth for the Online Food
Ordering and Delivery Platforms industry in the current year, compared with the previous years.
E3101 Road and Bridge Construction in Australia
The Road and Bridge Construction industry is projected to remain an important driver of the Australian
economy during 2020-21. Ongoing demand for the construction of large-scale developments in each
major capital city is expected to support industry expansion over 2020-21. Government stimulus
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spending on shovel-ready infrastructure projects, which include upgrades to local and arterial
roads, is also expected to support the industry. The projects include core construction phases of
the WestConnex Stage 3 in Sydney (M4-M5 Link) and The Northern Road Upgrade and Bringelly
Road upgrades as part of the Western Sydney Infrastructure Plan. They also include the continued
construction of the WestGate Tunnel development and the Mordialloc Freeway in Melbourne, and the
long-term upgrade of the Bruce Highway in Queensland.
Much of the impetus for major freeway developments comes from private equity involvement through
public-private-partnerships (PPPs) with federal and state government agencies. Industry revenue is
forecast to climb by 6.6%, to $35.0 billion, during 2020-21, despite weaker demand for roadwork on
new residential subdivisions due to the COVID-19 outbreak. All tiers of government are expected to
bring forward the pipeline of infrastructure projects to stimulate economic growth, with much of this
investment focused on large-scale road developments.
Australia Road and Building Construction Revenue
Infrastructure is expected to be a major component of government plans to recover from COVID-19.
45
40
35
30
Billion $AUD
25
20
15
10
5
0
2015-16 2016-17 2017-18 2018-19 2019-20 2020-21 2021-22 2022-23 2023-24 2024-25 2025-26
J5700 Internet Publishing and Broadcasting in Australia
The Internet Publishing and Broadcasting industry has bucked the trend of the wider economy. Industry
players have largely flourished in the wake of COVID-19, with lockdown restrictions across the country
forcing consumers to shift to digital spaces. Industry revenue is expected to grow by 6.1% in 2020-21,
to $4.9 billion. Online publishing services are expected to have mixed results over 2020-21, with a fall
in demand for items such as cars expected to erode the performance of online publishers. In contrast,
streaming services such as Netflix, Stan and Disney+ have surged in popularity over the current year, as
other forms of entertainment have been significantly restricted during the COVID-19 pandemic.
This trend is anticipated to continue over 2021-22, as both consumers and businesses are likely
to maintain COVID-normal restrictions, including limitations on gatherings and movement, for the
foreseeable future. This makes home entertainment, such as streaming services, a more viable and
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attractive option for viewers. In addition, high levels of unemployment are forecast to encourage more
subscribers. Streaming services can be a substitute for more expensive forms of recreation, particularly
for consumers seeking to minimize their expenditure over the next year as the economy recovers from
the effects of COVID-19.
Australia Data Consumption, by Connection Type
Rising popularity of streaming services has driven a surge in internet demand over the past decade.
10,000,000
9,000,000
8,000,000
7,000,000
6,000,000
Terabytes
5,000,000
4,000,000
3,000,000
2,000,000
1,000,000
-
Fixed network broadband Wireless broadbad Mobile handset internet
G4271a Pharmacies in Australia
The Pharmacies industry is set to post modest growth of 3.1% in 2020-21, with revenue totalling an
estimated $21.8 billion. Higher dispensing fees implemented as part of the $18.3 billion Seventh
Community Pharmacy Agreement, which came into effect on 1 July 2020, are likely to drive pharmacy
remuneration revenue. Industry participants will also indirectly benefit from several measures contained
in the Federal Government’s 2020-21 Budget, which includes a record investment into essential health
services in the wake of the COVID-19 pandemic. These measures include reforms to protect the
integrity of Australia’s medicine supply chain and enhance the government’s ability to respond to any
future pandemics. In March 2020, the government enacted supply limits on dispensing and selling
certain prescription medicines and OTC medicines, to halt panic-buying by Australian consumers.
These limits will remain in place at this stage, thereby affecting the Pharmacies industry’s operating
environment.
Increased pharmacy service revenue from providing patient-focused programs is also forecast to drive
industry revenue growth, as pharmacies continue to cement their role in wider primary healthcare.
Therefore, industry operators may benefit from government efforts to harmonise regulations around
pharmacists administering vaccines. Pharmacy flu vaccination numbers rose significantly in 2019-20
amid COVID-19 fears, with higher pharmacist-administered vaccination numbers likely to occur again in
2020-21.
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Australia Pharmacy-Administered Vaccines
The role of pharmacies in primary healthcare is expanding, including the administration of vaccines.
In the wake of COVID-19, this trend is expected to accelerate.
500,000 3.0%
450,000
2.5%
Share of national vaccinations
400,000
350,000
2.0%
Vaccinations
300,000
250,000 1.5%
200,000
1.0%
150,000
100,000
0.5%
50,000
- 0.0%
2016 2017 2018 2019
Vaccinations by pharmacists Share of total vaccinations
NCIRS, calendar years
Decline Industries
E3019 Multi-Unit Apartment and Townhouse Construction in Australia
The Multi-Unit Apartment and Townhouse Construction industry is expected to significantly slow down
as a consequence of the COVID-19 pandemic. Industry revenue is projected to fall by 31.4% in 2020-21,
to $30.9 billion. The industry was already showing significant signs of weakening prior to the COVID-19
crisis, with an overabundance of apartments limiting overall industry expansion. Population growth in
Australia has also slowed, with international migration down to a trickle from the pre-COVID-19 highs.
Consequently, demand for high-density housing such as multi-unit apartments is expected to be low in
2020-21.
The introduction of stimulus measures, such as the Federal Government’s HomeBuilder program,
is anticipated to further constrain the industry. The HomeBuilder program gives eligible builders a
$25,000 grant towards constructing a residential property. Potential buyers may consider building a
full residential property instead of an apartment with the support of the HomeBuilder grant. A surge in
remote working as a consequence of the COVID-19 outbreak has further reduced demand for industry
services, as the expansion of working-from-home capabilities has decentralised the working population.
As a result, more homeowners are expected to more consider constructing or buying houses in regional
areas, dampening demand for multi-unit apartments and townhouse construction in 2020-21.
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Australia Apartment and Townhouse Construction Revenue
Townhouse construction revenue has collapsed compared to its historic highs over the two years
through 2018-19.
60,000
50,000
Billion $AUD
40,000
30,000
20,000
10,000
-
N7220 Travel Agency and Tour Arrangement Services in Australia
The COVID-19 pandemic is heavily restricting the performance of the Travel Agency and Tour
Arrangement Services industry. In March 2020, the Federal Government implemented border
restrictions on inbound travellers, effectively stopping international travel to Australia. In addition,
the government has banned overseas holiday travel. The ban on Australia’s borders for inbound and
outbound tourism has meant that demand for travel agencies has been extremely low since March
2020.
While most states and territories have relaxed COVID-19 restrictions, the easing of state border controls
has been slower to implement. As a result, demand from domestic travellers looking to go interstate
has been weak during the first half 2020-21. However, most states and territories are expected to
open their borders to interstate travellers by Christmas 2020, which should boost demand for travel
agencies. However, it is unlikely that Western Australia will open its borders before its state election in
March, limiting demand for travel agencies that focus on WA tourism. Overall, revenue for the Travel
Agency and Tour Arrangement Services industry is expected to decline by 28.9% during 2020-21, to
total $5.3 billion.
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Australia Tourism Visitor Nights
Australia’s COVID-19 border controls are heavily limiting tourism activity.
800
700
Visitor Nights (million)
600
500
400
300
200
100
0
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026
International tourist visitor nights Domestic tourist visitor nights
N7211 Employment Placement and Recruitment Services in Australia
Revenue for the Employment Placement and Recruitment Services industry is forecast to weaken
significantly in 2020-21, dropping by 19.7% to $11.6 billion. This trend continues the large industry
decline during the final quarter of 2019-20, as government-mandated lockdowns in response to the
COVID-19 outbreak caused national unemployment to surge and business confidence to plummet.
Demand for new staff across most markets immediately fell and remained weak over the first quarter
of 2020-21. Domestic and global uncertainty surrounding the COVID-19 pandemic is expected to
continue over the remainder of 2020-21, negatively affecting labour demand. As a result, requirements
for services from employment placement and recruitment companies is projected to decline
significantly over 2020-21.
Despite overall industry weakness, some markets are anticipated to perform better than others in 2020-
21. For example, demand from the healthcare and medical sector for industry services is expected to
increase as a share of revenue, as the focus on people’s health and testing for COVID-19 symptoms
increases. Similarly, demand for delivery drivers is expected to rise as a portion of industry revenue in
the current year, due to a surge in online shopping.
Furthermore, the Federal Government’s JobKeeper Payment limited national unemployment increases
in 2019-20 and 2020-21, as employers have been subsidised to retain their staff. However, the program
is likely to subsequently restrict the number of people requiring jobs during the economic recovery
process in the second half of 2020-21 and through 2021-22, hindering industry demand growth.
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Australia Major Markets in the Employment Placement and Recruitment Services Industry
The healthcare and medical market is expected to increase as a share of revenue in 2020-21.
7.0%
20.3%
8.9%
10.1%
17.7%
10.4%
12.7% 12.9%
Other sectors and businesses Professional services sector
Manufacturing, transport and Logistics sectors Banking, finance and insurance sectors
Government sector Healthcare and medical sector
Construction, engineering and trades sector Retail and wholesale sectors
C1133a Cheese Manufacturing in Australia
Revenue for the Cheese Manufacturing industry is expected to decline by 12.5% in 2020-21, to $2.9
billion. Downstream demand from the food service sector has declined significantly due to state
government restrictions, especially those in Victoria, which is the second most populous state in the
country. While retail sales have increased, the product mix has changed as a result of the economic
fallout from the COVID-19 pandemic. Rising unemployment and falling household disposable incomes
have already prompted a shift from higher priced specialty cheeses towards more affordable everyday
cheese varieties.
Cheese manufacturers also derive a significant share of revenue from export markets. The value of
exports is forecast to fall by 8.5% in 2020-21, with demand constrained by the weak global economic
environment in the wake of the COVID-19 pandemic. Demand from Japan in particular, which accounts
for almost half of all Australian cheese exports, is expected fall. Furthermore, weak demand has
prompted a global oversupply of cheese. Consequently, the world price of cheese is expected to decline
in 2020-21, limiting the value of industry exports.
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Australia Cheese Manufacturing Revenue and Prices
Falling global demand due to COVID-19 will likely reduce prices and revenue for Australian
manufacturers.
5000 5500
4500 5000
$USD per tonne
Million $AUD
4000 4500
3500 4000
3000 3500
2500 3000
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021
Cheese Manufacturing Revenue World Price of Cheese
L6720 Real Estate Services in Australia
Operators in the Real Estate Services industry are expected to face significant challenges in 2020-21,
as economic conditions deteriorate due to the COVID-19 pandemic. Revenue is expected to fall by 8.1%
over the year, to $26.5 billion. At the height of the COVID-19 outbreak, government-enforced restrictions
on auctions and inspections weighed heavily on the number of housing transfers, with buyers and
sellers withdrawing from the market. Residential housing prices have come under increasing pressure
over 2020-21, with national prices falling by approximately 1.1% in the September quarter. Victoria has
contended with tighter restrictions than other parts of the country, and Melbourne house prices fell by
3.3% in the quarter.
The cash rate has fallen to a record low of 0.25%, providing some support for the sector through
reducing borrowing costs. Mortgage relief offered by the major banks is also expected to alleviate
pressure on some households. However, properties are likely to remain on the market for longer
and auction clearance rates are forecast to remain weak until economic conditions stabilise. Rising
unemployment and weak consumer sentiment are expected to constrain demand for industry services
over 2020-21, especially as support packages such as the JobKeeper Payment are wound back.
Economic uncertainty is set to continue weighing on residential property and rent prices.
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Australia Real Estate Services Revenue and Residental Housing Prices
Rising unemployment and weak consumer are expected to weigh on house prices and industry
revenue in 2020-21.
160
$29
150
$27
140
$25
130
$Billion AUD
Price Index
$23
120
110 $21
100 $19
90 $17
80 $15
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021
Residential housing prices (LHS) Real estate services revenue (RHS)
Outlook for COVID-19 Restrictions
Australia has been successful in its attempts to control COVID-19, relative to other developed nations.
Over the week through 26 October, Australia recorded only 137 new cases of COVID-19. Over the past
three months, most Australian states and territories have recorded minimal COVID-19 cases, and
most economic activity has resumed. However, Victoria, one of Australia’s most populous states, has
endured one of the world’s longest and strictest lockdown periods to contain the pandemic. The second
wave of COVID-19 in Victoria led other states and territories to introduce interstate travel restrictions.
Plans for an international travel bubble arrangement with New Zealand were also postponed.
Australia COVID-19 Cases Since June 2020
A surge of COVID-19 cases in Victoria has now been contained, enabling a resumption of
economic activity.
800
700
600
Daily recorded cases
500
400
300
200
100
0
NSW VIC QLD SA WA TAS NT ACT
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In August, Victoria recorded 8,673 cases of COVID-19. In October, it has only recorded 177 cases.
As Victoria has now successfully contained COVID-19, recording 0 cases over the two days through
27 October, interstate border restrictions are expected to ease by Christmas 2020. A travel bubble
arrangement with New Zealand also commenced in October 2020.
While Australia has successfully contained COVID-19, the virus remains and is unlikely to be fully
eradicated. State governments have ramped up contact tracing capacity to quickly contain outbreaks
without requiring broad and damaging economic lockdowns. Although economic activity has resumed
in most sectors across the economy, some restrictions remain. Face masks must still be worn in public
in Victoria. International travel remains restricted, significantly hindering tourism and accommodation
businesses. These restrictions are expected to remain in place as a preventative measure against a
resurgence of COVID-19.
Public gatherings remain subject to caps in most states, and these restrictions will likely remain in
place until a vaccine for COVID-19 is discovered and distributed. In Queensland, groups of up to 40
people can gather in homes and public spaces. In New South Wales, groups of up to 30 can attend
hospitality venues. Other states, such as Western Australia, have reported minimal COVID-19 cases for
several months and are operating with weaker restrictions.
New Zealand | Economic Summary
Real GDP
Real GDP in New Zealand is expected to decline by 4.3% in 2020-21, to $245.7 billion. The impact of the
COVID-19 pandemic on the New Zealand economy was strongest in the first quarter of the financial
year, from April to June. An extensive lockdown of the New Zealand economy during the first quarter
successfully achieved a near-elimination of COVID-19 across the country, enabling a relaxation of
almost all COVID-19 restrictions. As a result, New Zealand’s economic growth has rebounded after
the first quarter and is expected to remain strong throughout the year. However, a small outbreak in
Auckland, and ongoing restrictions on international travel, have continued to place downward pressure
on economic growth.
The New Zealand economy is expected to achieve real GDP growth of 5.7% in 2021-22, to reach $259.6
billion. New Zealand has outperformed most economically developed nations in its containment of the
outbreak of COVID-19, enabling a faster economic recovery. A low cash rate, increasing government
consumption expenditure and a falling unemployment rate are expected to boost GDP growth in 2021-
22.
Over the next five years, GDP in New Zealand is forecast to grow at an annualised 3.2%, to reach $287.1
billion. While government expenditure is expected to support this growth, the economy is likely to be
constrained by slower growth in net migration, construction activity and household expenditure in the
years immediately following the COVID-19 pandemic.
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New Zealand GDP Growth and Cash Rate
GDP growth in New Zealand is expected to rebound strongly in 2020-21, spurred by the
assistance of negative interest rates.
8% 8%
6% 6%
4% 4%
Official Cash Rate
Real GDP Growth
2% 2%
0% 0%
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
2023
2024
2025
2026
2027
2028
-2% -2%
-4% -4%
-6% -6%
Real GDP growth (LHS) Cash rate (RHS)
Unemployment rate
The rate of unemployment in New Zealand is expected to rise by 2.7 percentage points in 2020-21 to
6.8%. The containment and near-elimination of COVID-19 in New Zealand has enabled most industries
to return to normal operations, limiting a rise in unemployment. However, ongoing international travel
restrictions have significantly constrained industries reliant on tourism, particularly accommodation,
hospitality, sight-seeing transport and retail.
Unemployment is expected to improve in 2021-22, dropping by 0.9 percentage points to 5.9%. A
recovery in business confidence is expected to drive an expansion of business demand for labour,
creating new employment opportunities. In addition, the gradual reopening of international borders
is likely to support a revival in tourism activity, enabling a rebound in employment across tourism
industries.
Over the next five years, the national rate of unemployment in New Zealand is expected to decrease
at an average annual rate of 0.46 percentage points through 2025-26, to a low of 4.5%. This recovery
in unemployment is expected to be driven by strong monetary and fiscal stimulus, as well as the
weakness of the New Zealand dollar.
Consumer sentiment
Consumer sentiment is expected to fall by 18.2 index points in 2020-21, to average 100.7 index points.
This represents the lowest sentiment in New Zealand since 2008-09, when the global financial crisis
disrupted the economy. Consumer sentiment in New Zealand became negative during the first stages
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of the COVID-19 pandemic, in April and May 2020. Although consumer sentiment has since improved, it
was constrained in August by a minor outbreak of COVID-19 in Auckland.
In 2021-22, consumer sentiment is expected to increase by 7.5 index points, to 108.2 index points.
Consumer sentiment is anticipated to improve in response to a steady decline in unemployment,
as well as an expected rise in household discretionary incomes. New Zealand has shown resilience
in being able to quickly contain small outbreaks of COVID-19, enabling normal economic activity to
continue without the disruption of social distancing restrictions.
Consumer sentiment is expected to improve at an average annual rate of 4.8 index points over the five
years through 2025-26, to reach 124.8 index points. The rebound in consumer sentiment is forecast to
be driven by growth in household incomes, as well as the resumption of international travel with other
countries that have achieved near-elimination of COVID-19.
New Zealand Business Confidence and Consumer Sentiment
Consumer sentiment has deteriorated significantly in 2020-21, but has remained positive
overall. Business confidence was negative prior to the COVID-19 pandemic.
60 140
130
40
120
Consumer Sentiment Index
Business Confidence Index
20
110
0 100
90
-20
80
-40
70
-60 60
Business confidence (LHS) Consumer sentiment (RHS)
Business confidence
Although business confidence in New Zealand is expected to improve by 15.6 index points in 2020-21, it
will remain negative overall at -22.8 index points. This represents the fourth straight year that business
confidence in New Zealand has been negative. Notably, the expected level of business confidence in the
current year is more optimistic than in 2018-19, when weak commercial and residential construction
placed downward pressure on confidence.
In 2021-22, business confidence is expected to increase by 26.4 index points, returning to positive
territory. New Zealand’s fast recovery from the COVID-19 pandemic, in combination with an overall
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improvement in global economic activity, is expected to drive stronger business investment. However,
certain industries are likely to continue placing downward pressure on business confidence. In
particular, tourism activity in New Zealand is unlikely to reach pre-COVID levels for several years,
constraining tourism, hospitality and retail firms. Over the next five years, business confidence is
expected to increase at an average annual rate of 7.7 index points, to average 15.7 index points.
Cash rate
The cash rate in New Zealand has decreased to a historic low of 0.25% in 2020-21, a decline of 0.88
percentage points from 2019-20. The cash rate in New Zealand has fallen to this low following the
outbreak of COVID-19 and unprecedented monetary stimulus. In addition to cutting the cash rate, the
Reserve Bank of New Zealand has also introduced a government bond purchasing scheme via the
Large Scale Asset Purchase program.
In 2021-22, New Zealand is expected to become one of the few countries to implement negative
interest rates. The cash rate is expected to decline by 0.63 percentage points, to -0.38%. A negative
cash rate is expected to provide stimulus through reduced borrowing costs for consumers and
businesses, while also helping to weaken the New Zealand dollar to support export-oriented industries.
Over the next five years, the cash rate is expected to rise at an annualized 0.07 percentage points, to
reach 0.58% in 2025-26. Negative interest rates are expected to persist until 2023-24. Furthermore, the
Reserve Bank of New Zealand is unlikely to significantly raise the cash rate until a sustained rebound in
inflation and unemployment has been achieved.
Real household discretionary income
Real household discretionary income in New Zealand is expected to decline by 6.4% in 2020-21,
to $57.3 billion. A spike in unemployment has been the primary driver of this decline. However, the
decline has been partly mitigated by a significant reduction in the Official Cash Rate, which has
reduced mortgage repayment expenses. Significant fiscal stimulus, including wage subsidies, has also
supported household incomes.
In 2021-22, household discretionary incomes are expected to rise by 5.2%, to reach $60.3 billion.
New Zealand has outperformed other developed nations in its containment of COVID-19, enabling a
resumption of most economic activity and a faster rebound in household incomes. Over the next five
years, real household discretionary income is expected to grow at a compound annual rate of 2.9%, to
reach $66.2 billion. Total household discretionary income is expected to grow beyond the peak of 2019-
20 by 2022-23.
Fiscal support and stimulus measures
New Zealand introduced a range of economic support policies in response to the COVID-19 pandemic,
including wage subsidies, income-relief payments for the newly unemployed, subsidised workplace
leave support, short-term business loans, interest-free loans for SMEs, insolvency relief and deferred
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taxation. An income support package worth $2.8 billion has been provided to the most vulnerable,
including an ongoing $25.0 per week increase in benefit payments and a doubling of the Winter Energy
Payment in 2020.
In October 2020, Jacinda Ardern led the New Zealand Labour Party to a historic victory, achieving
majority control of the parliament for the first time since 1996. Amid the ongoing COVID-19 pandemic
globally, the Ardern Government is expected to continue several major stimulus measures. Labour has
announced a range of policies targeted specifically towards SMEs, which account for 28.0% of New
Zealand’s GDP and employ over 600,000 people. The Small Business Cashflow Scheme, which provides
low-interest financing for businesses, will be extended by three years. By the first week of September
2020, approximately 94,500 SMEs had used this scheme to borrow almost $1.6 billion. The average
loan was close to $16,500, and most of these SMEs employed five or fewer staff. Labour has also
announced plans to transition the Small Business Cashflow Scheme into a permanent micro-finance
initiative.
The Ardern Government has also pledged to provide a business subsidy of $7,500 on average, and
up to $22,000, to hire unemployed New Zealanders. Businesses will have to prove that the job is
sustainable, and will only receive the payment once the person has been employed for six weeks.
Labour will also increase the minimum wage to $20.0 per hour in 2021.
Over $5.0 billion in new infrastructure funding has been announced, including $1.2 billion for projects to
be commenced within 18 months. The Ardern Government has sought to fast-track project approvals
in order to drive a rebound in employment and demand across the construction sector. Labour has
highlighted six key growth regions to be the focus for infrastructure funding through the New Zealand
Upgrade programme. These regions include Auckland, Waikato, Bay of Plenty, Wellington, Canterbury
and Queenstown.
Growth Industries
M6940NZ Advertising and Market Research Services in New Zealand
The COVID-19 pandemic has significantly affected operators in the Advertising and Market
Research Services industry. Restrictions on movement and gatherings introduced to limit the virus’s
transmission, including a near-total ban on international travel, have caused economic activity to
decline. Reduced employment and consumption across the economy have led to lower demand for
advertising services. Furthermore, deteriorating business sentiment and consumer sentiment have led
many firms to substantially reduce their advertising and market research budgets, limiting demand for
industry services. As a result, industry revenue is expected to decline by 9.1% in 2020-21, to $2.1 billion.
Industry revenue is anticipated to rise by 7.5% in 2021-22, to $2.3 billion, as improving economic
conditions and consumer sentiment encourage businesses to increase their spending on advertising
and market research. In particular, New Zealand’s success in suppressing the COVID-19 pandemic is
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forecast to support industry revenue growth, as economic activity can continue without significant
restrictions. While the risk of future outbreaks remains, the prior success of New Zealand’s tracing and
suppression methods indicates that any reintroduction of restrictions would likely be limited.
New Zealand Advertising Demand and Consumer Sentiment
Fluctuations in consumer sentiment significantly influence the Advertising and Market
Research Services industry’s performance.
2.6 130
2.4 120
Billion $AUD
Index
2.2 110
2 100
1.8 90
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027
Industry revenue Consumer sentiment
A0132NZ Kiwifruit and Berry Growing in New Zealand
The Kiwifruit and Berry Growing industry has performed strongly over the past five years. This is
expected to continue in 2021-22, with forecast growth of 6.5%, to reach $2.5 billion. Over 95% of
revenue is generated from the growing and harvesting of kiwifruit, most of which is exported around
the world. Kiwifruit is one the largest horticultural crops in New Zealand. China is the largest market for
New Zealand-grown kiwifruit. Demand was not significantly affected during the height of the COVID-19
outbreak in China at the start of 2020, and consumer demand there is expected to continue to grow
strongly during 2021-22. The industry is also expected to continue benefiting from the elevated prices it
has recorded over the past five years.
However, a shortfall in employment during the harvest season could affect output. Berry and kiwifruit
growers strongly rely on overseas seasonal workers. While the New Zealand Government has allowed
overseas workers already in the country to extend their visas, the current border restrictions do not
provide exemptions for workers under the Registered Seasonal Employment (RSE) scheme to enter the
country. The 2021-22 kiwifruit harvest begins in March 2021. If farmers are unable to fill jobs usually
accounted for under the RSE scheme then output and revenue could be compromised.
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New Zealand Kiwifruit Exports Outperform
Kiwifruit exports are expected to outpace total growth over the course the COVID-19 pandemic.
40%
35%
30%
25%
20%
Annual change
15%
10%
5%
0%
2017 2018 2019 2020 2021 2022
-5%
-10%
-15%
Kiwifruit Exports Total Exports
G4211NZ Furniture Retailing in New Zealand
The Furniture Retailing industry is projected to grow by 6.1% in 2021-22, to reach $1.0 billion. The
projected economic recovery from the COVID-19 pandemic is anticipated to lead to strong growth in
consumer sentiment and real household discretionary income, boosting consumers’ willingness to
spend on furniture products. In addition, capital expenditure on residential buildings is forecast to rise.
This trend tends to benefit the industry, as consumers generally require new furniture for new or newly
renovated spaces.
Many bricks-and-mortar retailers are expected to establish ecommerce platforms over the two years
through 2021-22, as the COVID-19 pandemic has significantly boosted consumers’ uptake of online
shopping. Consequently, industry firms with ecommerce platforms that can leverage strong brand
names and fast delivery times are likely to be better able to compete with online-only operators.
Consumers are also anticipated to become more confident about in-store shopping over the next year,
compared with periods in 2020-21 when concerns regarding COVID-19 were higher.
The value of the New Zealand dollar is forecast to appreciate in 2021-22, making imported products
comparatively cheaper. This trend is projected to reduce purchase costs, as many industry firms source
their products from overseas. Consequently, industry profitability is projected to improve slightly.
However, price competition, especially from online-only retailers with lower overhead costs, is forecast
to remain significant.
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New Zealand Furniture Retailing Industry Cost Structure
Purchase cost increase as a share of industry revenue by 2.3 percentage points in 2020-21 due
to the depreciation of the New Zealand dollar.
0.0% 10.0% 20.0% 30.0% 40.0% 50.0% 60.0% 70.0% 80.0% 90.0% 100.0%
purchases wages rent utilities profit depreciation other
D2640NZ Electricity Retailing in New Zealand
The performance of the Electricity Retailing industry is expected to improve over 2021-22, largely as
a result of the forecast recovery in the wider economy over the year, following the negative impacts
of the COVID-19 pandemic. The outbreak of the COVID-19 pandemic in early 2020 drove a sharp
decline in industry revenue over 2020-21. As the economy recovers from the pandemic, demand from
commercial and manufacturing markets is forecast to pick up, driving an increase in demand for
electricity. Additionally, the expected reopening of New Zealand’s borders during the 2021-22 financial
year is anticipated to support a recovery in net migration, driving an increase in the New Zealand
population, and further contributing to industry revenue growth.
The Electricity Retailing industry is also expected to benefit from changing trends in electricity
consumption. Net energy consumption is forecast to rise strongly over 2021-22, supporting an
improvement in demand conditions and driving growth in wholesale prices. However, the growing
adoption of small-scale household solar panel systems is expected to limit this growth. Overall, industry
revenue is expected to rise by 4.7% in 2021-22, to a total of $7.1 billion.
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New Zealand New Energy Consumption
Energy consumption fell significantly in 2020-21, but is expected to rebound in 2021-22.
620
600
580
Petajoules
560
540
520
500
480
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022
K6321NZ Health Insurance in New Zealand
The Health Insurance industry is expected to grow by 3.3% in 2021-22, to $1.7 billion. Private health
insurance in New Zealand is supported by employment levels, as it is subsidised by employers. While
the negative economic effects of the COVID-19 pandemic are projected to extend into early 2021-22,
the New Zealand economy is expected to gradually recover, boosting participation in the labour market.
This trend is expected to support the uptake of private health insurance.
As the economy is expected to recover from the pandemic, premiums are anticipated to increase
over the next five years as health insurers seek to cover rising costs, supporting industry revenue
growth. A larger population aged 50 and over is also forecast to generate greater demand for health
insurance services, while young professionals and families are likely to increasingly take up health
insurance through group health plans provided by employers. However, rising premiums are expected
to limit growth, as some younger policyholders see less value in private health insurance. Private
health expenditure is anticipated to grow and become an increasingly important source of funding for
New Zealand’s health system over the period, particularly as demand rises for health care and social
assistance.
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Decline Industries
E3022NZ Institutional Building Construction in New Zealand
The Institutional Building Construction industry is forecast to contract by 4.3% in 2021-22, to $3.5
billion. This follows on from a sharp contraction in the previous year as the New Zealand economy
slipped into recession following the outbreak of the COVID-19 pandemic. In addition to the economic
fallout from the pandemic, the industry’s performance is likely to be dampened by the refocusing of
government spending towards infrastructure funding, such as the $6.8 billion New Zealand Upgrade
Programme, to support general economic expansion. Private investment in institutional building
projects under Public-Private-Partnership (PPP) arrangements is expected to fall over the short term
due to the diminished capacity for developers to secure funding.
The anticipated slowdown in population growth since the outbreak of COVID-19 is likely to dilute the
underlying demand for the construction of schools, kindergartens and other institutional buildings.
Demand is also expected to ease following the completion of major institutional building projects in
recent years. This includes the Acute Services Building in the Christchurch Hospital redevelopment,
Building C of the Mt Eden Corrections Facility and the New Zealand International Convention Centre
(NZICC) in Auckland.
C2223NZ Architectural Aluminium Product Manufacturing in New Zealand
The Architectural Aluminium Product Manufacturing industry is forecast to fall by 2.7% in 2021-22,
to $1.4 billion. The ongoing effects of the COVID-19 pandemic are projected to constrain demand
for architectural aluminium products in 2021-22. Demand from the non-residential property market
is anticipated to fall in 2021-22 as businesses are likely to continue to adopt more flexible work-
from-home arrangements and greater dependence on online shopping channels. Weak demand
from commercial and industrial building markets is expected to put downward pressure on sales of
commercial window systems, shopfronts and aluminium curtain walls.
The recovery in residential construction activity is expected to be slow in 2021-22, constraining demand
for domestic window and door systems, aluminium garage doors, spouting and guttering systems.
The national unemployment rate is projected to stay high and net migration is expected to remain low
in 2021-22, which is likely to take demand pressure out of the housing market. However, population
growth, a recovery in household disposable income and a low interest rate environment are anticipated
to support a recovery in underlying demand for residential property and investment, placing upward
pressure on demand for industry products in 2021-22. Additionally, a continued shortage in the supply
of housing in New Zealand is expected to support a slight uptick in new dwelling consents issued in
2021-22, which will likely limit the overall decline in industry demand.
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New Zealand Architectural Aluminium Manufacturing Revenue and Dwelling
Consents Issued
Issued dwelling consents are projected to rise by 1.3% in 2021-22, to 37,916. This is expected to
limit the decline in demand for architectural aluminium products.
1,800 45,000
1,600 40,000
Dwelling consents issued
1,400 35,000
1,200 30,000
Million $NZD
1,000 25,000
800 20,000
600 15,000
400 10,000
200 5,000
0 0
Architectural Aluminium Product Manufacturing revenue (LHS) Dwelling consents issued (RHS)
Q8790NZ Personal Welfare Services in New Zealand
While revenue for the Personal Welfare Services industry in New Zealand is anticipated to fall by 2.6%
over 2021-22, it is expected to remain relatively high compared to the previous decade. The anticipated
revenue decline is primarily due to the COVID-19 pandemic contributing to record highs in revenue
during 2020-21. Economic and social trends influence the industry. Declining economic activity and a
rising unemployment rate tend to boost demand for industry services, as more people require financial
assistance to support themselves. Rising demand for social support from areas such as aged-care
and disability assistance also boost industry demand. During 2021-22, the consumer sentiment index
is expected to increase and remain positive, household discretionary and disposable incomes are
forecast to rise and the national unemployment rate is projected to fall. These factors are all likely to
reduce demand for personal welfare services, as more New Zealanders will be able to live without
support mechanisms. However, the fall in demand is projected to be mostly offset by continued
demand from family and child welfare services, New Zealand’s aging population and the New Zealand
Government’s Wellbeing Budget 2020, which will provide continued support to those most affected
by the COVID-19 pandemic. For example, government expenditure on aged care services and demand
from aged care services are forecast to rise during 2021-22.
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