— Property

Minutes of the Monetary Policy Meeting of the Reserve Bank Board

International economic developments

Members discussed international developments with a cross-country review of economic activity and effects in labor markets during the pandemic. A recurring theme was that Australia had fared relatively well in output levels and labor market outcomes. The December quarter 2020 national accounts showed that GDP in Australia had recovered to close to pre-pandemic levels. In contrast, GDP was still considerably below pre-pandemic levels in many other countries. The loss of output over 2020 had also been more minor in Australia than in many other countries. This reflected both the relatively more minor initial decline of the production in Australia and the swift recovery since then.

Regarding labor market outcomes, members noted that most countries had experienced a significant contraction in employment and labor force participation since the pandemic. Australia’s experience had been unusual in that engagement and involvement were now higher than the levels prevailing at the end of 2019. Favorable health outcomes in Australia, the design of the JobKeeper and other temporary support programs, and the swift recovery inactivity had all contributed to a strong bounce-back in the domestic labor market.

Despite the rapid recovery in employment in Australia, members noted that wages growth domestically had slowed to a greater extent and had been more subdued than in other countries. In response to the pandemic, the labor market adjustment in Australia had principally taken the form of adjustment to hours worked and widespread wage restraint. In contrast, in some other countries, including the United States, the adjustment had mainly been through a decline in employment.

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