Australia’s living standards actually increased in 2020 at a faster rate than the average over the past decade, due to surging commodity prices and rock bottom interest rates.

That is the conclusion of the latest Deloitte Access Economics business outlook, released on Monday, which predicts that despite jobkeeper expiring at the end of March, unemployment will decrease through 2021, albeit gradually.

As a result of the improved outlook, Deloitte has suggested the government should adjust its current plan of making budget savings when unemployment is “comfortably” below 6% to now target an unemployment rate closer to 4.5%.

But Labor has warned the Deloitte report confirms wages growth is expected to reach a new low of 1.2%, following years of stagnation before the pandemic.

Deloitte has assumed that virus numbers stay suppressed in Australia with herd immunity achieved by late 2021 or early 2022, a timetable now in doubt due to the revamp of the vaccine rollout due to blood clot warnings applied to AstraZeneca.

Despite conservative assumptions that international travel will remain weak in 2021-22, Deloitte concludes that Australia’s economy is “roaring back”.

“Remarkably, real national income per head (the best measure of living standards) grew by 1.4% through 2020 – above the average of the decade preceding the pandemic,” it said.

Deloitte cited increasing prices for iron ore, LNG and thermal coal as a major boost to the Australian economy. Metals used in the production of electric cars including nickel, lithium, cobalt and copper also had big price rises.

The fact oil prices had recovered but remained below their level a year ago pointed to “permanently suppressed” demand due to remote working, reduced air travel and the rapid shift to electric vehicles, it said.

Deloitte said Australia’s jobs recovery, with unemployment already down to 5.8%, had been “really remarkable” and forecast it would continue to fall to 5.6% by late 2021, 5.3% by 2022 and 5.1% by 2023.

Deloitte predicted many instances of business failures and job losses in hard-hit sectors including tourism and hospitality, but noted that the withdrawal of jobkeeper was dwarfed by reductions in economic supports the economy had already sustained.

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Between July and September cuts to the rate of and eligibility for jobkeeper and superannuation withdrawal reduced the amount of money being pumped into the economy every month by $24bn.

The present cliff, including removal of the coronavirus supplement and replacement with a small permanent increase in jobseeker, would reduce monthly supports from $5bn down to a little over $1bn, Deloitte estimated.

Despite markets predicting a rise in inflation, Deloitte argued it was not possible until unemployment falls far enough to lift workers’ bargaining power and wages.

Given the delay in wage agreements reflecting higher bargaining power and this flowing through to prices, Deloitte forecast interest rates would not rise until 2024, the same timeframe the Reserve Bank of Australia has put on raising rates.

Deloitte forecast that the wage price index would grow by just 1.2% in 2021-22, before recovering to 2.2% in 2024-25.

The shadow treasurer, Jim Chalmers, said the report showed Australia’s forecast recovery “will be defined by even weaker wages growth and is hostage to the vaccine rollout and withdrawal of government support”.

“This outlook attributes much of the recovery to the easing of restrictions, but the economy is still being held back by labour market weakness, record low wages growth, low levels of business investment and poor productivity,” he said.

On Friday Scott Morrison downplayed the possibility the expected slowdown in the vaccine rollout as a result of the AstraZeneca warning could hit the budget bottom line.

Morrison told reporters in Canberra the Coalition always took “a very conservative approach on the budget parameters”.

“Already the budget is significantly outperforming the parameter estimates that were set in the mid-year statement.

“Unemployment is well below where we anticipated it to be, and [there are] many other things that flow from that, the impact on payments, on social security and so on.”

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