Six months ago we updated you and surprisingly much has changed. Australia has weathered the COVID-19 crisis better than expected, with recovery being stronger and faster than anticipated. The roll out of a COVID-19 vaccination program will in common with global expectations, positively affect confidence levels and activity. In August last year I predicted our borders would remain closed into 2021. We now know that "until" means late 21 at least when international travel may resume without the inconvenient restrictions.
And now to some economic data. Official interest rates are 0.1% predicted to remain so for up to 3 years. The economy grew by 3.1% in the December quarter, only 1% of its pre-COVID levels and recovery is becoming more even across more and more industry sectors. GDP is forecast to grow on average 4.6% this year, consumer spending, business confidence and housing markets are all proving positive. Employment confidence is growing. Unemployment at 5.8% has returned to pre-pandemic levels.
Trade tensions with China characterised 2020. Many of our export commodities, particularly agriculture and natural resources were impacted by hefty tariffs and import uncertainty. Australian producers have commenced some redirection to other markets in Asia, South Asia and the Middle East and a more balanced ex-China/Japan trade and investment strategy is developing. A recent Business Council of Australia study in which we took part recommended to the Australian Government ways to broaden and deepen South East Asian trade and economic activity.
Our services sector, a significant part of our economy, remains stressed due to border closures, particularly affecting tourism and education. In January the COVID introduced zero dollar screening requirements for foreign inbound investment approvals were lifted. Changes to Australia's foreign investment laws and new national security laws that were widely mooted in the second half of 2020 now apply to all transactions. Whilst some unhappiness at the lengthy approval times remain, foreign capital are still entering the market and we're still seeing inbound investment deals.
Local M&A is extremely active, some examples of which we've acted:
- Bain Capital bought Virgin Australia out of administration at $3.5 billion;
- China Investment Corporation purchased a landmark commercial complex in Sydney for just under $1 billion; and
- Japan's Shinsei Bank acquired a stake in Latitude Finance, the old GE Finance from a consortium which included KKR and Deutsche Bank.
Australian technology, healthcare and online retail are all sectors that have performed reasonably well during COVID and those sectors present opportunities and of course the financial services sector remains attractive, more activity rising from the 2018/19 Financial Services Royal Commission with further divestments by financial institutions of non-core assets. And notwithstanding the nascent sectoral confidence, distress is still an ongoing theme, especially as government support is being wound back. Major Australian banks are keen however to pursue non-insolvency solutions. The resources sector, particularly oil and coal, although coal not without ESG and funding market appetite issues will also raise opportunities and especially in the renewable sector which, though not without its own challenges, is extremely active currently.
For our colleagues and our friends overseas we hope you continue to remain well and stay safe and we look forward to seeing you in person again soon.