Market Recap: 26th October

A silver lining in the property market… 

New data from the Commonwealth Bank has emerged this week, revealing that Australia’s property market is no longer being dominated by property investors but rather owner occupiers. This revelation is good news as both renting and purchasing a property in Melbourne and Sydney will continue to become cheaper. Meanwhile property prices in Adelaide and Perth have seen a significant increase over the past year. 

While investors dip in their spending habits, owner-occupiers are having a small rise. Source: CBA. Picture: Supplied.

Transition to Jobkeeper 2.0 sees a fall in wages and employment

The ABS has released data that states payroll figures have gone down by 0.7% in just the one week that the initial JobKeeper subsidy has been reduced. JobKeeper is now paying a reduced amount but it is also harder for businesses to be considered eligible.

Jobs and wages began declining as soon as JobKeeper was lowered. Picture: Supplied.

Although it was necessary for the government to reduce the funding in order to limit the amount of debt they owe, the recent cut off threatens to evaporate the little consumer and business confidence that was remaining in the economy.

Many retailers are now looking to Christmas as a knight in shining armour that will entice consumers to splurge some of the savings that has been accruing in their bank over the past 6 months. 

The Buy Now Pay Laters are here to stay… 

The emergence of the latest fintech innovation Buy Now Pay Later has been like a rollercoaster ride to say the least. 

Afterpay, Zip and Sezzle have all performed extraordinarily on the stock market, despite a September crash that led many to believe the industry was just a bubble. The crash was caused by big companies including Paypal, Commbank and NAB all deciding that they were going to enter into the Buy Now Pay Later market. 

Despite the challenges, last week Afterpay officially ticked over the $100 share price mark, when in March the share was only trading for $8. 

Afterpay, Zip and Sezzle from the March 23rd crash to today have increased in price by 1047%, 447% and 1967% respectively. Screen Shot 2020-10-25 at 5.22.16 pm

It is a testament to a fundamental shift in the way that consumers are spending their money and appears that it outlive this recession and become a long term norm. 

Overall, the ASX 200 last week fell an infinitesimal 2 points, investors were pessimistic about the lack of US Fiscal stimulus and the looming US election. 

The government’s obsession with returning the budget to surplus should be loooong gone. In hopes to increase aggregate demand and accelerate the economy’s return to full employment, sees a huge $11.5 bn investment into road and rail projects.

 ” …unlike borrowing to cover the government’s day-to-day needs, borrowing to fund infrastructure was a form of investment.” – Reserve Bank governor Dr Philip Lowe

Infrastructure injections could increase the economy’s productive efficiency and productivity – for instance, reducing the time it took workers to commute from work and home. Moreover, high rates of population growth and immigration, sees more people needing infrastructure, as a result of congestion and shortages.

The 2020-21 budget allocated government expenditure towards the infrastructure investment, rather than using tax cuts and concessions, thus should have a higher “multiplier effect” (whereby the proportion of every new dollar is spent and re-spent within the economy → increasing growth) than tax cuts. 

The ABS data shows a 2.8% increase this month, as opposed to 6.1% increase in the number of payroll jobs for youths since the middle of March. The number of payroll jobs has fallen for every other age group over the same period, with those over 60 being impacted the worst.

To combat this, the $4 billion JobMaker Hiring Credit initiative, encourages a reduction in unemployment. The ‘credit’ is used to incentivise businesses to employ more young workers aged 16-35.