Australia: Recent lockdowns mean lower than expected growth but inflation to pick up sharply – Fitch

In its latest analysis of Australia, the global rating giant Fitch said, “If higher inflation and interest rates over 2021-2023 modestly exceed our baseline projections, this could be credit positive for the sovereign and banks.”

However, the interesting part was the rating institute’s comments over Australian economics, as follows.

Key quotes

Structured finance transactions are unlikely to be negatively affected, but risks will depend on the factors driving any outcome above our forecasts.

Recent lockdowns mean that growth this year will be lower than the robust levels we had previously projected, but we still expect inflation to pick up sharply.

The labor market has tightened much faster than we had expected, and wage-growth acceleration presents upside risks to inflation, meaning that monetary policy may be tightened further and faster than we project in our baseline assumptions.

FX reaction

Following the news, AUD/USD remains heavy around the yearly low flashed the previous day, down 0.10% near 0.7335 by the press time of early Tuesday morning in Asia.