CANBERRA, AAP – Reserve Bank governor Philip Lowe says it is important that business investment grows if Australia is to enjoy a strong and durable recovery from the COVID-19 pandemic.
Opening an online conference on Monday, Dr Lowe said looking across a range of indicators, Australia is doing much better than most other advanced economies.
“One piece of the recovery that is yet to click into gear is business investment,” he told the Melbourne Business Analytics conference.
He said it was understandable that many firms deferred their investment plans during the downturn, although there was a pick-up late last year.
“But there is still a long way to go to get back to the level of investment before the pandemic, which itself was low by historical standards,” he said.
“If we are to have a strong and durable recovery, it is important that the recovery in business investment continues and broadens.”
He said investment in IT, digitisation and data science will be critical in lifting the nation’s productive capacity.
“These investments allow better decision making and a faster response to the changes in our economy and society,” Dr Lowe said.
A new barometer has found Australia and New Zealand leading the pack when it comes to the global fight against the negative economic and health impacts from the pandemic.
But the research modelled by consultants EY agreed that it is time for business to take up the baton of the recovery through investment.
EY Oceania chief economist Jo Masters says Australia’s strong global position should give businesses the confidence they need to invest and hire, for consumers to open their wallets, and for governments to progress productive reform.
“Federal and state governments have ploughed an unprecedented amount of fiscal stimulus into the economy, supported by the Reserve Bank of Australia,” Ms Masters said.
“The growth baton now needs to pass to the corporate sector to drive forward our continued recovery, boosting investment to stand alongside household spending as growth drivers.”
The EY Global COVID-19 Economic Index looks beyond the traditional measures of GDP and employment, and incorporates balance sheet strength across households, government, central banks, non-financial corporates and financial institutions.
However, Ms Masters said when support measures like the JobKeeper wage subsidy end later this month, she expects there will some businesses that can’t survive and some jobs will no longer be there.
But she believes it is time to move away from the big, broad-based support measures and instead support specific industries like those that have been impacted by the lack of international tourism.
The opening of international borders will be highly dependent on the rollout of the vaccine both in Australia and overseas.
“While it is difficult to pick the exact timing to open our borders, I think Australia remains a very desirable destination for students, importantly for skilled migrants, and for tourists,” Ms Masters told the ABC.
“I do think that we will see those three sectors come back over time.”