CBA’s new forecasts are predicting even more good news, especially for young people.
So CBA have published their updated forecasts, and it’s looking pretty bumper.
The forecasts were already good, and now they’re even better.
So in basic terms, they’re expecting GDP to snap back quickly out of the lock-down affected September quarter, and quickly return to trend. Liker Covid never happened.
Unemployment stays low and actually heads even lower, ending up at just 4.1% by the end of the forecast horizon.
That’s pretty amazing, and considerably better than the last time we heard from CBA.
There’s a few reasons they’re pointing to.
The first is that the vaccine roll-out is going much better than expected. Basically, we’ve gone from one of the worst-performing developed countries, to one of the best.
Second, the recent rounds of lockdown had a much more mild impact on the labour market than expected. To be honest, I thought it would be worse as well.
As it played out, the unemployment rate never lifted, largely thanks to government support packages, and people actually feel pretty secure in their job prospects, based on the survey measures.
So that’s pointing to a lower unemployment rate going forward, which obviously supports consumer spending, and the housing market.
On that front, consumer spending is expected to snap back much more quickly than expected too. Take a look at CBA’s credit card data below. We can see that spending in NSW rebounded phenomenally quickly once Sydney started reopening.
You’d have to expect Victoria to do the same.
And consumer spending going forward is going to be supported by a huge savings pool that’s been built up over the past 18 months.
On CBA’s forecasts, there’s a string of massive quarterly contributions to household saving.
And the average balance on CBA term deposits and offset accounts has mushroomed.
This is the warchest that’s going have a huge impact on economic prospects in 2022.
Interestingly, CBA also break the boom in savings down by age-cohort.
What this shows is that pretty much the younger you are, the more you have seen your savings increase – not dollar for dollar, but on percentage terms.
At any rate, it points to Gen Z and Millennials have much more savings than they probably anticipated.
What’s interesting about this is that Gen Z and Millennials are our prime property buying cohort. This is our first home buyers.
So this plays into the hunch I have that the huge build up in household warchests will be used to drive property purchases in 2022, and give property prices a further kick-along.
But, whatever the case, we’re ending 2021 in much better shape than anyone could have expected, and we’re carrying that form into 2022.
Bring it on. It’s going to be a big year.
JG.