Monday, January 24, 2022

2021 Is Making Us Richer Than Ever (Seriously)

Agricultural production is also booming. Quantities are increasing in almost every major livestock commodity and almost every major crop commodity – for the first time in at least 50 years that production for so many products will increase simultaneously.

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Fourth, entrepreneurship is at a record high. COVID has sparked a boom in new businesses as people lose their jobs or decide it’s time to put their best ideas into practice. Business registrations in Australia are 30 percent higher than pre-pandemic levels. This year 100,000 new businesses were opened in NSW and 79,000 in Victoria – in both cases, the highest number of business starts ever.

Fifth, even wage growth has started to pick up. The past decade has been disappointing, but the Reserve Bank of Australia forecasts wage growth to reach 3 per cent over the next two years, the fastest rate since 2013.

Sixth, economic growth is expected to reach its fastest rate in 25 years next year. If economic growth is the annual scorecard for the way our economy is tracking, 2022 will blow it out of the park. The RBA is forecasting an average growth of 5 percent for the calendar year. The last time we had a year of growth that was very strong was 1987.

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Overall, these six facts represent a relatively positive set of economic conditions. Of course, these averages often hide pockets of very real struggle and loss. But at least on average, the results for jobs, growth, agricultural production, startups and wages are very good.

So how did we get here? How did we turn Epidemic Lemons into Prosperity Lemonade?

A large part of the answer is policy decisions. Governments in Australia and around the world faced the COVID crisis with enormous force. He fired all kinds of ammunition into his policy arsenal, including billions in fiscal support, record low interest rates, and massive bond-buying programs.

The encouraging situation we are enjoying at the end of 2021 is partly the result of an economy laden with government funding. This will present challenges for the future including huge public debt, inflationary fears and asset price bubbles.

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Positive conditions can also turn very quickly if Omron or other variants lead to renewed shutdowns or other disruptions. The awesome thing about Omicron is that it teaches us that a wider range of mutations are possible than we previously imagined. That is, this virus can affect our economy for a long time.

But for now, be grateful for the things that are going right. And with a federal election set for early next year, it’s hard to see Canberra pull off the National Economic Punch Bowl too quickly.

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Nation World News Desk
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