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2021 OECD Economic Surveys: Australia 2021

image of OECD Economic Surveys: Australia 2021

The pandemic recession in 2020 was milder than in most other OECD countries, but recent outbreaks have prompted the country to begin transitioning from a zero tolerance to a containment approach to the virus. As the recovery becomes more firmly entrenched, public policy must focus on setting the conditions for another prolonged period of strong and well-distributed growth in living standards. Recent efforts to reduce regulatory, administrative and financial barriers for young high potential firms should continue. At the same time, the resilience of the economy to future economic shocks can be supported by rethinking institutional frameworks related to fiscal and monetary policy, ensuring the social safety net is adequate and that the financial sector supports household financial resilience. Australia is uniquely vulnerable to climate change, but it is also uniquely placed to benefit economically from global decarbonisation due to its natural endowments (e.g. wind, sun, ocean access) and strong human capital to form the basis of innovation in carbon abatement technologies. A coherent and coordinated national strategy that defines clear goals and corresponding policy settings for achieving the government’s emission reduction objectives will be critical.

SPECIAL FEATURE: THE ROLE OF THE FINANCIAL SECTOR IN SUPPORTING A SUSTAINABLE AND INCLUSIVE RECOVERY

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Key policy insights

The pandemic recession in 2020 was milder than in most other OECD countries, but recent outbreaks of the Delta variant of COVID-19 have put much of the country in a strict lockdown. As a result, economic activity will contract, with a gradual reopening of the economy only occurring once vaccination rates have risen significantly. As the economy recovers, public policy must focus on setting the conditions for another prolonged period of strong and well-distributed growth in living standards. Recent efforts to reduce regulatory and administrative barriers for young high potential firms should continue. At the same time, the resilience of the economy to future economic shocks can be supported by rethinking institutional frameworks related to fiscal and monetary policy and ensuring the social safety net is adequate. Australia is uniquely vulnerable to climate change, but it is also uniquely placed to benefit economically from global decarbonisation. Domestic greenhouse gas emissions will need to decline on a significantly faster pace if the country is to achieve net zero emissions by 2050.

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