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Aussies to exhale in 2022 as inflation steadies

  • The RBA expects Australia’s economy to recover next year.
  • Inflation growth to steady before rising more noticeably in 2023.
  • Quantitative easing (QE) could resume in February 2022.

Australians are expected to breathe a sigh of relief in 2022 with the Reserve Bank of Australia (RBA) expecting the economy to recover from the COVID-19 induced contraction.

The RBA has also lifted its outlook for inflation, as a range of Australia’s trading partners report higher inflation rates from consumers and companies continuing to scramble to secure access to goods which are perceived to be short in supply.

In its 2022 outlook, the Morgan Stanley Australia Research team also see that for inflation, the loosening of global supply constraints and strengthening domestic demand will drive price growth to be relatively steady in 2022 before picking up more noticeably in 2023.

They expect further macroprudential tightening to be announced in the 2H22 as household leverage moves to record highs. Quantitative easing (QE) could resume in February 2022, and is expected to drop from A$4 billion a week to A$2 billion until May.

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