IMF forecasts economic circumstances to be worse than post WW2
The IMF has revised their predictions to argue that the global recession will be deeper and the recovery will take longer than initially anticipated. Advanced economies are going to experience a contraction of around 8% and emerging economies will shrink by 5%.
Global government debt is projected to be 130% of GDP, even higher than the 120% peak in 1946, yet instead the money is going towards employees and business rather than planes, tanks and ammunition.
To further highlight the destruction of this virus, the GFC saw public debt rise by 10.5% but IMF projects public debt to rise by 18.7% in this year.
Education overhaul aims to future proof our next generation of workers
Minister for education, Dan Tehan, has proposed a dramatic change in the cost of university courses, in order to incentivise future students to study Maths, Science and Engineering and steer away from less “job relevant” courses such as Commerce, Law and Humanities.
Ironically, economics has been grouped into this not relevant category and yet the fundamental mechanics of Mr Tehan’s policy is inspired by law of demand, elasticity and marginal analysis.
The reasoning for the policy is based on the government’s pre-pandemic modelling predicting 62% of employment growth in the next five years will be in health care, science and technology, education and construction.
In complement to this, premier Gladys Berejiklian has announced primary and secondary curriculums will be reworked to have a greater focus on Literacy, Maths and Science. Additionally, there is talks of potentially removing the ATAR!
Increased minimum wage; a limited relief for low skilled workers, at the expense of struggling small businesses
The fair work commission announced a 3% rise in the minimum wage, lifting the hourly amount to $19.49 and weekly amount to $740.80.
This will affect 2.2 million workers, however the Australian Chamber of Commerce and Industry argued the increase should not have exceeded 1.8% as “businesses are struggling to cope with high input costs” as well as severely reduced demand for their goods and services. This will have an adverse effect on the underemployment rate which is already at a high of 13.1% in May, according to ABS.
The emergence of a second wave in Victoria and globally prompts the ASX to see red
The ASX recorded a fall of 0.8% across the 5 days last week, in response to the increased new infection rates in Victoria, Beijing and South Korea.
Qantas and other stocks in the travel industry have been ravaged by this pandemic. Qantas couldn’t hold out any longer, announcing 6000 job cuts (20% of its workforce!) and 15,000 workers being stood down. Its shares fell 10.31% last week.
Conversely, Qantas’s competitor Virgin, had some good news last week with American based Bain Capital buying the aviation company and vowing to retain jobs and invest in Australia’s regional sector.
Some good economic news to end off a gloomy market recap
Australia has been successful in its bid to host the FIFA Women’s World Cup in 2023, which will no doubt provide increased tourism exporting opportunities that similarly arose when the 2000 Sydney Olympics occurred.