Episode Details

Just like 2020 was the year of surprises many of us didn't foresee, I believe 2021 will offer its own surprises – but this time, on the upside.

There is a perfect storm of economic outcomes and that's what I'm going to be chatting about with Pete Wargent in today's show as we have a look at the macroeconomic big picture that will affect our property markets, our economy, and our lives in general in the coming year.

It's really only been a year since Coronavirus started to affect us.

Just look where we were in the middle of last year and it's hard to believe where we are now.

• We've had spectacular success in containing the Coronavirus.
• The Morrison Government build the bridge he promised to get us across the other side and federal government and state government spending killed the recession, which was the deepest since the Great Depression.
• We now have record low-interest rates.
• A sooner-than-expected arrival of vaccines.
• And all the above has pumped up economic growth above expectations and helped the property markets and the stock market rebound, bringing both business and consumer confidence.

We have an embarrassment of riches, with our economy surging ahead, so I hope my chat with Pete Wargent will give you some more clarity about what the future holds so you can make better investment and business decisions.

Economic and property trends for 2021 with Pete Wargent

Our property markets don't operate in isolation, so I believe it's good to regularly have a look at the big picture, the macroeconomic factors affecting not just Australia's economy, but the world economy.

Australia's V-shaped economic recovery.

Australia's economy has surprised on the upside.

While technically we had a recession last year – two consecutive quarters of negative GDP growth, really the March quarter had very minor falls in GDP – there was really only one quarter, the June quarter, with a significant drop in economic activity. And boy has the economy rebounded since.

Our economy is likely to keep performing well moving forward

While the recovery to date has unfolded much more quickly than expected, it is important to remember that:

• it has been uneven and
• that despite recovering to pre-COVID levels by mid-2021, there remains a high degree of spare capacity in the economy.

There is still some way to go and there are still risks ahead.

$120 billion savings war chest is firing our economic recovery

Saving is about to become unfashionable again.

After rushing to build deposits during the COVID crisis, it seems we are now determined to burn through accumulated cash. What's more, the trend is going to accelerate.

New forecasts suggest that by the end of this year we will be saving less than half what we are putting away just now, and that level will be around a quarter of what we were saving at the peak of the crisis.

As panic swept the broader economy last year, the national savings rate soared to unprecedented levels, hitting 22 percent — or 22c for every dollar — at its peak.

To put that number in historical perspective, it meant we saved $187bn in 2020, which works out at more than the total savings over the past 3½ years.

More recently the savings rate figure has started to drop, though it is still sitting somewhere near 12 percent.

The Commonwealth Bank ­estimates that households have put aside $120bn more than what is normally saved in the June, September, and December quarters last year — equivalent to 6 percent of gross domestic product as overseas travel and social activities were curtailed.

The bank's analysts believe this money will be spent over the next few years, providing continued economic momentum as a good chunk of this money will find its way into consumer spending.

And some of it will go to paying