As the S&P/ASX 200 Index (ASX: XJO) looks set to cement its fourth consecutive day of losses, top economists warn of a volatile economic period once the country attempts to return to normal.
Unfortunately, many have been impacted by the recent COVID-19 delta surge. This has led to extended lockdowns and restrictions across much of Australia at some point or another. Businesses have been closed, or at minimum, interrupted — putting immense strain on the Aussie economy.
Economists from some of the biggest banks in the ASX 200 foresee a rollercoaster ahead for our economy.
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What do economists from ASX 200 banks expect?
As part of the government's reopening plan, Australia must reach 80% fully vaccinated before some level of normality may return to daily activity. This follows a surge in COVID-19 cases as the delta strain proves difficult to contain. Sadly, the recent surge in cases on local soil rivals that of last year.
The re-emergence has spurred many Australians to get inoculated, in the hope our economic suppression will soon subside. Unfortunately, economists from some of the biggest banks in the ASX 200 forecast the road to be sprinkled with bumps.
Commonwealth Bank of Australia (ASX: CBA) head of economics Gareth Aird expects the real test to come once the nation hits 80% fully vaccinated.
It will simply be a matter of time before the virus is rampant across the entire country. For the first time, Australia will experience 'living with COVID'.
This is likely to mean that there will be a significant period of adjustment for households and businesses as the virus circulates within the community in large numbers and hospitalisations rise. It will mean that the economic recovery, at least initially, is a bumpy ride.
Gareth Aird, CBA
Certainly, the hardest state hit by the resurgence currently is New South Wales. Another ASX 200 bank constituent, Westpac Banking Corp (ASX: WBC) chief economist Bill Evans, is expecting an 8.3% shrinkage in the NSW economy this quarter. This reflects the extended lockdowns in the state through to the end of October.
Sectors susceptible to the volatility
Economists from Australia and New Zealand Banking Group Ltd (ASX: ANZ) are concerned about the industries that have already been impacted. Sectors such as tourism, arts and recreation, and hospitality were highlighted as those that could have the most to lose.
Furthermore, the economists explained the abovementioned sectors have a limited ability for 'catch-up spending'. This could be compounded by consumer spending appearing to dry up compared to last year.
In short, economists from ASX 200 banks expect the Federal Government will need to offer more financial support in the coming months.
