It is now 380 days ago since penning my ”Economic roundup” article. In that article I referred to the previous rollercoaster 6 months with respect to the Australian economy and Federal politics. Well, if the 6 months in the lead up to 30 June 2019 was a rollercoaster, the 6 months in the lead up to 30 June 2020 can only be described as a rollercoaster off the rails and out of control.
Who could have predicted COVID-19 and the enormous destruction it has brought along with it that has impacted so much of the world and its people (apart from wiser folk than I). With some 7,761,609 confirmed cases and 430,241 deaths worldwide at the time of writing (https://covid19.who.int) Australia has, by comparison, performed remarkably well with currently 128 active cases nationwide (www.covid19data.com.au) and 102 deaths.
From a financial perspective though, it has come at a great cost to Australia. The Federal Government’s economic support package of $259 billion represents some 13.3% of annual Gross Domestic Product (GDP). All current economic data suggests that Australia is now in economic recession (defined as two consecutive quarters of negative growth) which is the first Australia has experienced since 1991, some 29 years ago.
The Reserve Bank of Australia (RBA) released their key economic indicator snapshot on 10 June 2020 (I have shown the comparison same time last year) showing the following:
- Official cash rate 0.25% (1.25%)
- Inflation 2.2% (1.3%)
- Economic growth 1.4% (2.3%)
- G7 (Canada, France, Germany, Italy, Japan, UK and US) GDP growth rate -1.3% (1.8%)
- Unemployment rate 6.2% (5.0%)
- Employment growth -3.1% (2.4%)
- Wage growth 2.1% (2.3%)
- AUD to USD $0.70 ($0.70)
- Current population 25,719,130 (25,396,680) as per abs.gov.au
Looking at some of these statistics, you might say that it doesn’t feel too bad. In fact, if these statistics were the final outcome of the impact over the last 3 months, it would be quite impressive. The trouble is, the full impact won’t be known for a little while yet and no doubt the worst is yet to come as the statistics only become available well after the fact and can lag a few months behind. The March quarter’s national output contracted by 0.3% and most Banks are predicting a June quarter negative growth rate of 7%.
On a positive note, Australia’s success with containing the virus has allowed the easing of restrictions well ahead of the Government’s original timetable thereby providing the opportunity for a faster than expected recovery. This has also lead to increased consumer confidence. We trust that although employment will increase (some suggesting it could be between 8 and 9%), that a faster recovery will also contribute to faster employment throughout the rest of this year and into 2021.
Australia has really copped a beating with fires, floods, droughts and now coronavirus. Unfortunately, the combination of these events has decimated what was projected to be budget surplus for the first time in 11 years.
Although there are plenty of challenges ahead, perhaps we will see a positive trend towards the conscious buying of Australian made products and supporting our local shops and businesses.
Unfortunately, we haven’t been able to avoid the “R” word over the last 6 months of the 2020 financial year. However, let’s hope that it is short lived as Australia’s restrictions continue to ease under a “COVID- normal” environment until a suitable vaccine emerges.