Jones: Uncertainty & Risk Aversion - Before & After The Pandemic

RBA Head of Economic Analysis Jones notes "that risk-based issues were among those contributing to the increased appetite for saving over investment globally before the pandemic. There are reasons to suspect that uncertainty and risk aversion could continue to have an important bearing on the global outlook as we emerge from the shadow of a once-in-a-century shock. Here in Australia, it would seem premature to completely rule out the possibility of an overhang of cautious behaviour by households and firms, as seen internationally following previous shocks like the Great Depression and the GFC."

• "However, the unusual origins of the COVID-19 shock, and the fact that in Australia at least, many household and business balance sheets are in better condition today than before the pandemic, suggests the domestic economy could follow a quite different trajectory compared to past rare disasters experienced abroad. This is consistent with our central scenario for the Australian economy and the surprising strength in the domestic recovery to date."
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