Please enjoy this easy-to-read economic summary prepared by our Chief Economist Anneke Thompson.
It is fair to say that FY 2022 has ended with very different global economic conditions than what it began with. In July 2021, Australia, and much of the world, was still facing lockdowns to stem Covid-19 infections, while the race to get vaccinated was on. Inflation was just beginning to rise, but most central banks believed it would be transitory, as supply chain issues were ironed out. How wrong that turned out to be. While supply chain issues have certainly been a major contributor to inflation, it is clear solid demand, fuelled by savings accumulated over the pandemic and government stimulus, have also contributed. We now find ourselves in a situation of trying to prevent a wage-price inflationary cycle, something that seemed so unlikely only a year ago.
The next year will be a very challenging one for the Australian and global economy. If inflation does not start to come down towards the latter half of 2022, the risk of an interest-rate induced recession will become very real. Both household and business borrowing is going to be significantly more expensive for at least the next 2 years, and residential and share markets are already losing value. However, there is cause for some optimism. Businesses are still positive, and why wouldn’t they be after having to operate remotely, or not at all, on and off 2 years. Unemployment remains very low, and job vacancies at record levels. For workers in most industries, there are more opportunities than ever before to change jobs to seek better pay.
At CreditorWatch we will be keeping a close eye on all matters economic for the next financial year, and look forward to keeping the market updated.
Download The 2022 EOFY Economic Update
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