Early activity in the first quarter of 2021 was demonstrative of positive business sentiment, with companies looking to execute on their investment strategies resulting in higher levels of market activity.


  • Private investment rebounded stronger than expected over the previous half due to a recovery in demand, higher capacity utilisation and accommodative financing conditions. Strong household and business balance sheets pointed to an increase in consumption and capital expenditure with easing in COVID-19 containment measures.
  • The recovery is now expected to be disrupted again by widespread intermittent State lockdowns that will likely continue until COVID-19 related public health challenges related to the latest delta variant outbreak are stabilised.
  • With the majority of the 2020 COVID-19 induced policies beginning to subside, the Federal Government recently announced its four-phase plan detailing pathways out of restrictions and the reopening of the economy based upon the achievement of target vaccination rates.
  • The effect of the RBA’s monetary policy settings continue to support the economy. Forward guidance regarding the cash rate in the medium term continue to provide support for investment, liquidity and market expectations.

Market Commentary

  • Market activity in H1 2021 was buoyant as companies looked to capitalise on progressing investment (organic and inorganic) following a year of rationalisation and adjustment in 2020 as a result of the pandemic. Rising business investment alongside increased consumption had lifted GDP projections to pre-pandemic levels. Consumption expenditure was expected to become the largest driver of growth as households strengthened balance sheets and liquidity positions during the pandemic. Business investment had also recovered with the vast majority of capital expenditure spent on plant and equipment.
  • The Reserve Bank has continued to communicate over recent months that it would not increase the cash rate target until economic conditions improve and inflation is sustainably within the target range of 2 percent to 3 percent p.a. Based on its current outlook for the economy, these conditions are not likely to be present until 2024. The RBA has noted that it does not expect the cash rate to be increased for at least the next three years.
  • The Australian economy was showing positive signs of recovery, supported by strong economic tailwinds over the beginning of the 2021 year. The continued rollout of the vaccination program and State Governments’ responding swiftly and assertively to contain any detected COVID-19 cases had allowed economic activity to broaden. However, given the breadth and length of the current lockdowns it is expected that Australia’s economic recovery will be interrupted over the short and medium term delaying the expected bounce back.
  • A depth of liquidity remains in the Australian market and financiers’ appetite for new opportunities is increasing as a pathway to economic recovery becomes clearer and bank provisions are wound back. There is still a degree of caution around credit and structure vis-à-vis pre-pandemic levels, however borrowers are also being supported by non-bank lenders where appetite can be broader than the credit spectrum of traditional regulated bank financiers, unlocking a breadth of creative funding options.

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