Outlook 2022

January 2022

Phil Ruthven AM

Australians and other nationalities go into 2022 with some known good and some bad news, but also a lot of unknowns.  As always.

The good news heading into 2022 includes:

  • near-universal vaccination against Covid-19, easing of border closures and lockdowns:
  • a lot of savings built up during lockdowns, so we can lift consumption and our GDP:
  • low and seemingly manageable inflation, so far:
  • continuing low interest rates that make servicing mortgage debt manageable, so far:
  • full employment:
  • a continuing positive current account in trade and incomes with the world:
  • more technology helping us via the post-2007 Digital Era:
  • some overdue social and behavioural reforms at state and federal levels.

The not-so-good news…

  • Covid-19 mutations keep coming, Omicron, being the latest:
  • skyrocketing housing prices and the world’s largest mortgage debt as percentage of GDP:
  • a weakening mining outlook in terms of ore prices:
  • a snail-pace recovery in international tourism:
  • little likelihood of reforms (tax, labour and the undemocratic senate veto power):
  • possibility of continuing poor government in terms of vision and propriety:
  • the distraction of a federal election:
  • increasing climate-change impacts:
  • international tensions.

Some of the unknowns for 2022 and beyond are:

  • will the slowing of our GDP growth and standard of living over the past five decades continue?
  • will we experience a major stock market crash?
  • how will climate change impact on our sustainability, vulnerable industries, and lives?
  • how fast might interest rates rise?
  • how does Australia balance its relationships with the West and fast-rising Asia?
  • will we enter another ‘Cold War’ between major nations?
  • what industries and jobs might collapse given the downside of the Digital/Hitech era?
  • where are the new industries and jobs coming from?

We cannot cover the full gamut of issues in the external environments that surround our businesses and employment for 2022 – let alone the whole 2020s decade in this Insight – so, we will narrow down the scope to the just a handful of these environments.


Global growth matters to Australia.  For a start it impacts our exports.

Having had no global recession during the 61 years from 1946 to 2007, the world has now had two in the first two decades of this new century (the 2007 GFC and the 2020 Covid-19 pandemic). The recovery was strong in 2021 and is expected to be still above average in 2022.  That said, world growth is slowing from over 5% per annum in the 1940s and 1950s – recovering from the Great Depression and World War II – to half that pace in this decade, partly due to lower birthrates and slowing growth rates, especially in Europe and North America.

Despite a sharp slowdown in China’s growth, Asia will head the list of growth economies again in 2022.   Covid-19 remains an issue for the world and Australia, with hopefully far less impact than in 2020 and 2021, due to vaccinations.

But debt is a known serious issue.  The following chart shows the three types of debt as a share of GDP for major economies: government/national debt; corporate debt; and household (mainly mortgage) debt.  What is intriguing is the scary levels of each type of debt with different nations.

Those with very high national debt are Japan, Italy, and the USA. Those with a high corporate debt are France, China, the Netherlands, and Japan.  And those with high household debt (mainly mortgage debt) are Australia, Switzerland, Canada, and the Netherlands.

So, Australia is at risk too, especially when interest rates rise.


Stock markets are scary too, as we see below.  The NASDAQ and S&P have scaled heights not experienced since the end of the Second World War; aided by virtually zero interest rate quantitative easing and other unsustainable monetisation actions by government. Most pundits are forecasting a severe correction, which we may be seeing the beginning of now.

Australia is a worry, for having a share market that rose so slowly, but is still probably over-trend and subject also to a correction in 2022.


One of the burning questions for 2022 is just what will happen to interest rates.  The RBA say not much for another year or two with official rates, but the market for mortgages is they say going up now, even though commercial rates aren’t – yet.  There is, of course, some grounds for mortgage rates to go up due to skyrocketing house prices.

But lest we think low interest rates, and particularly real interest rates are at record lows, the chart below puts paid to that perception; in this case using 10-year Bond Rates as the measure.

We have been much lower many times in the past.  High interest rates would seem to be a fair way off, and certainly not likely in 2022.


Australia’s economy is likely to begin 2022 very strongly, but may fade in the second half, as exports could weaken, inflation may rise and interest rates too, putting pressure on households with large mortgages.  It is of some concern that Australia’s GDP growth is slowing decade by decade as the trendline on the chart shows; the price of being a rich nation and one with reform-fatigue and slowing productivity.

Our industry mix, going into 2022 is also at an interesting point in time.

Our agricultural industry is at its lowest share of total economic output (GDP) since British settlement in 1788; at just 2.6%.   Yet the mining industry has its highest share of GDP since the 1850s gold rush era, at almost an eighth of our GDP (12.4%), but under some pressure, with falling mineral prices and easing demand growth.

But it is our service industries that create most of our wealth in the Infotronics Age of the post-1960s that displaced our Industrial Age; now almost 70% of GDP.  Clearly the Covid-19 pandemic diluted some of these industries’ importance, especially Hospitality, Transport and Cultural & Recreational Services.

These are now recovering as we enter 2022.


Australia’s exports as a share of output (23.4% of GDP) are at the highest point since 1951, such has been the enormous demand for minerals which accounted for almost 60% of exports, and closer to 70% if the processing of some of them into metals (manufacturing) is included. China is, by far, our biggest customer.

Our exports would have been even higher if the Covid-19 pandemic had not impeded inbound tourism – over 25% of exports.


The biggest component of the nation’s economy is household expenditure; not surprising as that is the prime purpose of the economy.

Household income in 2021 was $1.8 trillion, of which 74% was expended after paying taxes of 15.5% of the income and saving a further 10.3% of it.

The breakdown of the income is revealed in the following exhibit.

It surprises most to know that the average household income these days for our 10 million households was $178,000 in 2021.  But that includes income that isn’t seen in the form of superannuation and imputed rent (the ABS’ estimate of the rent an owner would have paid if a renter instead of an owner).

And, equally surprising to many is that very little of our incomes is spent on goods: just over a fifth in 2021.  The rest goes on services we incur and pay for (including financial services or ‘capital related’ as shown in the exhibit above) and taxes, returned to households (unequally) via government services.

Some spending jumped in recent years, notably spending on non-durable (electrical, furnishings, hardware) and very little on hospitality, entertainment and transport – all due to the Covid-19 pandemic.

This is changing back fast going into 2022, with the exception of overseas and some interstate travel. But hospitality and gambling are booming.


Job-keeper saw nearly a million employees keep their jobs if not actually working during the Covid-19 pandemic.  Indeed, the number of hours actually worked fell by 1.5% in F2020 and saw only a modest rise in F20221.  However, the F2022 year should see an increase in the hours worked by as much as 4%.

But the statistic we watch more closely is unemployment; and the next chart is encouraging in this regard, with unemployment falling to 5% as we entered 2022 calendar year.


We began by suggesting it would be impossible to cover all the environments in which our businesses and workers need to operate within.  So, at best we can pose issues and questions that are extant.


Who will win the Federal and Victorian elections in 2022, and how much does it matter?

Will friction between State and Federal governments that surfaced during the Covid-19 pandemic continue or just go back to normal?

Ongoing trade problems

Which commodities is China still interested in buying, and which are they rejecting?

What are other opportunities for trade in the Asia Pacific?

Working protocols

What will be the new order in formal versus informal work locations?

What new technologies will boost the virtual workplace trend?


SME’s? What is their future?  What kind of businesses?

Will the hospitality and travel industries recover and how will they change?

So many issues, so many questions, so many unknowns.  The important thing in going into a new year is to determine what are the key issues that affect one’s own business and put aside the nice-to-know but not critical issues and changes.





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