This Survey is published on the responsibility of the Economic and Development Review Committee of the OECD, which is charged with the examination of the economic situation of member countries.The economic situation and policies of Australia were reviewed by the Committee on 15 July 2021. The draft report was then revised in the light of the discussions and given final approval as the agreed report of the whole Committee on 30 August 2021. The Secretariat’s draft report was prepared for the Committee by Ben Westmore and Christine Lewis under the supervision of Patrick Lenain. It benefitted from contributions at various stages by Laurence Boone, Alvaro Pereira, Isabell Koske, David Bradbury, Bert Brys, Scott Cameron, James Mancini, Julio Bacio Terracino, Dennis Dlugosch, Muge Adalet McGowan, Dan Andrews, Jane Ellis, Enrico Botta, Rob Patalano, Catriona Marshall, Chiara Monticone, Anna Dawson, Caroline Roulet, Serdar Celik, Miles Larbey, Leigh Wolfrom, Mamiko Yokoi-Arai, Iota Nassr, Jonathan Hambur (Australian Treasury) and David Hansell (Australian Treasury). Statistical research assistance was provided by Damien Azzopardi, and editorial assistance by Stephanie Henry and Karimatou Diallo. The previous Survey of Australia was issued in December 2018. Information about the latest as well as previous Surveys and more information about how Surveys are prepared is available at http://www.oecd.org/eco/surveys.

At the onset of the pandemic, well-coordinated policies across different levels of government sought to suppress COVID-19 transmission. As a result, the rise in deaths from the virus was temporarily halted (). Control of the public health situation facilitated the reopening of the economy. However, recent COVID-19 outbreaks have meant much of the country has returned to a strict lockdown. The vaccine rollout started slowly but has picked up pace in recent months as the country begins transitioning from zero-tolerance to a containment approach to the virus.

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.

Australia’s financial sector entered the COVID-19 crisis in a strong position, enabling it to play a key role in cushioning the pandemic’s impact. Once the economy reopens, policymakers will turn their focus to securing a robust, sustainable and inclusive recovery. However, low interest rates are boosting house prices and demand for credit in a banking sector that is already highly exposed to housing and highly indebted households. At the same time, many young and innovative firms – which are the drivers of job creation and productivity growth - struggle to access finance. And financial frictions impede the alignment of financial flows with environmental sustainability. Addressing these obstacles, through regulatory change, developing alternatives to bank finance and facilitating technological transformation, would raise productivity and set the recovery on a more sustainable path. Financial inclusion and financial literacy are comparatively high and financial education is entrenched at schools. Further efforts are still needed to address persistent gaps in outcomes for disadvantaged groups, accompanied by stronger consumer protections to ensure that the recovery is inclusive.