Consistent with the labour market data, the June quarter national accounts confirmed that prior to the current lockdowns the economic recovery was continuing at a solid pace – any drag from the end of the JobKeeper scheme and other COVID-supports was more than offset by positive momentum in both public and private domestic demand.

The ongoing lockdowns in NSW, Victoria and Canberra will clearly put a significant drag on employment and activity in the near term. Assuming vaccination rates continue at their current pace, restrictions in NSW and Victoria should begin to ease in mid-Q4, which will enable the economic recovery. But the vaccination program is necessary not sufficient. The policy environment will need to remain supportive, and households and businesses will have to adjust to a new COVID-normal, where cases are endemic within the community (with the worst health outcomes largely prevented by the vaccination program) and some restrictions are still needed. Given this, the initial phase of the recovery is likely to be bumpy, and this will delay the return to full employment and the 2-3% inflation target, and the time for rate lift-off (to late 2023).