Officially in a recession
Talk about finally saying what everyone was thinking! As of last week, data from the Australian Bureau of Statistics (ABS) revealed that in the three months between April and June, the economy suffered a contraction in GDP of 7%. This consequently translates to the largest quarterly fall in GDP since the ABS started collecting data all the way back in 1959. Quantifying the devastating impacts of the Coronavirus paints an extremely sobering picture; one that will require a pragmatically long road back to full recovery.
Although it may seem like the worst days are behind us, such sharp and sudden downturns in both unemployment and revenue will likely see the economic consequences linger for years to come. This may even come in spite of GDP growth in the next quarter, with both social security expenditures and the jobless rate conversely showing no signs of slowing down (being as high as it has ever been since 1998).
Despite all the doom and gloom, the economy could have definitely been in even worse shape. For starters, the Australian Financial Review found that only 4 countries fared better than us in the March-June Quarter, with only South Korea, Finland, Denmark and China facing GDP losses less than 7%. Fifth place doesn’t quite get on the podium, but still remains a testament to the effectiveness of Australian policy inclusive of the stimulus packages. Particularly, 314 billion dollars of government stimulus built a solid foundation, giving light at the end of the tunnel for a number of individuals and businesses who were no longer able to put food on the table. However, it is still worth noting that these countries faced larger contractions in the period before, with Australia suffering just a measly 0.3% fall.
Victorian Ghost Town:
With Melbourne fast becoming the known hotspot for Coronavirus in Australia, it comes as no surprise that this is the region that has been hit the hardest. In fact, new data courtesy of PwC has revealed that a staggering 110 billion in revenue could be lost in the next 5 years, along with a further 80,000 jobs. This coincides with the state of Victoria extending their state of emergency for another 4 weeks, while announcing a stimulus package valued at 3.3b dollars for further business support. Premier Daniel Andrews described the package as their “biggest for business support” and takes the overall support to over 6b. The government subsidy will offer varied avenues to boost local business; 1.1b will be allocated to cash grants for SME’s most affected by the pandemic, 822m will go towards the Victorian Business Support Fund and 251m will be allocated to the Licensed Value Fund (restaurants, pubs, clubs etc.). A further breakdown of the package can be found below:
- 10m of deferred payroll tax for one financial year
- 137m dedicated to tax relief packages
- 44m for business adaptation to COVID restrictions
- 8.5m to the “Click for Vic Campaign” aimed to help local business
- 15.7m to the Victorian export market to assist with logistics
The Australian “Staycation”
Despite Overseas arrivals and departures hitting new lows, the Australian tourism industry has received an unexpected windfall due to a boost in domestic travel. In light of new data received by Tourism Research Australia (TRA), Australians took 5.41 million trips in June up from 2.36 million in May resulting in an increase of expenditure of 1.1b. This improved the performance of temporary lodging companies such as AirBnb and Stayz, quantitatively reflected through a 0.05% increase in the share price.