This is episode number twenty in our series for 2020 and today’s date is Friday, June 19.
First I talk to Ipsos Australia director David Elliott on the results of its latest ongoing surveys into COVID-19. The survey found that Australians are divided in their opinions about opening businesses due to concerns that it puts too many people at risk of COVID19.
And then I’ll be talking to IFM Investors chief economist Alex Joiner on what’s happening with our recession.
But first, let’s talk to David Elliott.
The IMF will probably lower its 2020 economic growth estimate from its April forecast of a 3% contraction, said Managing Director Kristalina Georgieva. A new outlook will be released on June 24 and is expected to reflect extremely challenging conditions, Georgieva said.
US President Donald Trump is preparing a $US1 trillion ($1.4 trillion) infrastructure investment plan, according to reports by Bloomberg. The big-ticket plan would not only target investments in traditional infrastructure like roads, but it would also provide funding for 5G and rural broadband. Should the proposed spending be approved it would add to the $US3 trillion in stimulus approved by Congress in May. It would provide an additional boost for the world’s biggest economy at a time when the Federal Reserve has expressed some wariness about the pace of recovery, while investors have been rattled by an uptick in the number of new COVID-19 cases.
Salmon exporters, including from Tasmania, are now in Beijing’s sights after a fresh outbreak of coronavirus cases at a produce market, sending global markets into a pessimistic mood. Beijing has ordered all schools to close in an escalation of containment measures as it struggles to halt a new coronavirus outbreak which has already spread to neighboring provinces.
The Chinese capital lifted its emergency response to level two and said that people will have to be tested for the virus before being allowed to leave the city. The total reported a number of infections has reached 106, according to the National Health Commission, while cases linked to the Beijing cluster have already been reported in two provinces in China’s northern region.
The new breakout in Beijing coronavirus cases has raised further questions over the potential for a second wave and highlighted the difficulties that will be found worldwide when attempting to resume economic activity while minimising the spread of the virus. Parts of Beijing are on “wartime” footing against a second wave of coronavirus infections after a spike in cases that Chinese authorities have linked to imported salmon sold at the city’s biggest seafood and produce market. In a potential blow to Australia’s seafood industry, salmon sales are being halted throughout China and imports will be temporarily blocked.
Supermarkets and restaurants stopped selling salmon on Sunday after local media reported the virus was detected on a chopping board used to slice imported salmon. Tasmania’s Tassal and Huon aquaculture groups sell salmon to China. However, Chile, Norway, and Denmark account for the bulk of the country’s salmon imports. The potential for a new surge of infections in China, where the virus originated, has raised the prospect of new lockdowns that could derail the country’s fledgling economic recovery. Equity markets have also been unsettled by a jump in US coronavirus cases. Since the first U.S. case of the new coronavirus was reported on Jan. 20 in Washington state, more than 2.1 million people have been diagnosed, with clusters around New York City, Seattle, and in California. There have been 116, 851 deaths in the US.
At 40.0, the IPSOS Global Consumer Confidence Index for June is down 1.3 points from last month, 8.7 points compared to its pre-pandemic level of January, and almost 7 points lower than at any time since its creation in March 2010. However, the past month’s drop in the index is significantly less steep than those seen between March and April (4.1 points) and between April and May (3.1), suggesting that the decline in consumer sentiment is bottoming out.
The Global Consumer Confidence Index is the average of each of the 24 world markets’ National Indices. It is based on a monthly survey of more than 17,500 adults under the age of 75 across 24 countries, conducted on Ipsos’ Global Advisor online platform. Between May and June, 12 of the 24 countries show a drop of at least 1.5 points in their National Index. However, no country shows its index falling by more than four points, while five countries show no change or some improvement, including Japan (+0.1), South Korea (+0.4), Italy (+0.6), China (+0.8), and Australia (+2.0).
The latest payroll data from the Australian Bureau of Statistics and Australian Taxation Office shows there was a 0.4% increase in the number of payroll jobs in the week ending May 30. ABS head of labour statistics Bjorn Jarvis said jobs in the accommodation and food services sector increased by 5% in May but remained 29.1% lower than in mid-March. Payroll jobs worked by females increased by 1.4% through May, compared with 0.4% for males. Based on the number of jobs at the end of April, the 1% increase in jobs over May equates to about 124,000 jobs being added.
Federal and state governments will fast track approvals for 15 major infrastructure projects, including the Brisbane-Melbourne inland rail and an electricity interconnector to Tasmania, as part of the push to kickstart the economic recovery from the coronavirus recession. Approvals for mining projects in Western Australia are set to be fast-tracked as part of a push to accelerate billions of dollars’ worth of infrastructure projects across the country, despite controversy over the destruction of Indigenous heritage sites.
Fifteen projects worth a collective $72 billion in public and private investment will be accelerated, Prime Minister Scott Morrison revealed in an address to the Committee for Economic Development of Australia’s State of the Nation forum. The Brisbane to Melbourne Inland Rail project, and road, rail and iron ore projects in Western Australia are among those listed. Other projects include the Marinus Link between Tasmania and Victoria, the Olympic Dam extension in South Australia as well as emergency town water projects in NSW. Under a “bilateral” model between the Commonwealth and state and territory government, joint assessment teams will work to slash approval times for the projects, worth a collective $72 billion in public and private investment. The speech is likely to alarm environmental groups who see deregulation as code for riding roughshod over environmental approvals. The government is now undertaking a statutory review of the 1999 Environment Protection and Biodiversity Conservation Act.
Prime Minister Scott Morrison has warned Australians will need to tighten their belts as the nation recovers from the coronavirus pandemic. Mr. Morrison has warned keeping wage subsidies and other coronavirus economic supports in place for too long will damage the super-charged growth Australia needs to escape the crisis.
Addressing a Committee for Economic Development of Australia virtual conference on Monday, Mr. Morrison said the budget this year and next would show the largest deficits in history. He said programs such as the $70 billion JobKeeper wage subsidy scheme had been vital to protect the economy in the short term but longer term the budget had to be brought back to balance, warning that spending would have to be reined in to help tackle what he said would be record deficits this year and the next, Mr. Morrison gave his strongest indication yet that the JobKeeper and JobSeeker packages would have to start winding up around their legislated expiry at the end of September, “We cannot say to Australians that government or anyone else, ultimately, will be in a position to ensure that every job can be saved, and every business can be saved.
That is unrealistic,” he told Parliament. “We will seek to do what we can, as we have with the unprecedented support, but I’m not going to make false promises to the Australian people. We have cushioned the blow but we cannot prevent the blow.” Mr. Morrison said the economy will have to grow by almost 4% annually for the next five years to recover from the coronavirus recession. Mr. Morrison said it would take two years for the Australian economy to get back to its pre-coronavirus level. Fully recovering the lost growth would require five years of economic growth at least one percentage point above trend. Trend growth is currently estimated at 2.75% a year. The last time Australia went close to such an extended consecutive period of above-trend growth was in the 1960s under the Menzies and Holt governments, a time also marked by high population growth.
Australian Council of Trade Unions secretary Sally McManus says blue-collar jobs alone won’t get Australia out of its “pink recession”, in which women have taken a substantially larger economic hit than men. She has urged the government to not forget female workers affected by the coronavirus lockdown in the wake of its commitment of $688 million to the male-dominated construction sector through its HomeBuilder program.
Speaking at the State of the Nation forum hosted by the Committee for Economic Development of Australia, Ms. McManus said the pandemic and associated shutdowns had a greater impact on women, and the government’s economic response needed to address that. About 55% of workers in the hospitality and retail industries are women, while more men than women work in the arts and recreation sector. However, at the height of the pandemic in April, government data showed across the economy about 50% more employed women than men were not getting any shifts.
International travel to Australia stopped almost dead in April as COVID-19 restrictions sent overseas visitor arrival numbers plunging 99.7%, the largest fall on record. Australia also recorded its largest-ever decrease in overseas travel, with the number of Australians returning home after a short-term trip down 98.1% from the same time last year. The plunge was felt across the country with the numbers for all states down 97.7% or more. The number of people arriving with international student visas in April dropped by 44,470, or close to 100% compared with the same month last year. Overseas visitor arrivals to Australia decreased 51.9% in March compared with February, to just 307,900 trips.
One in five home loan deferral customers is in strife, leaving banks in trouble. Major banks are bracing for a savage increase in problems in their massive mortgage portfolios after preliminary investigations suggest up to one in five home loan borrowers who have asked for a repayment holiday during the coronavirus crisis are in deep financial strife.
According to the Australian Banking Association, banks granted home loan deferrals to 480,727 customers, whose total borrowings come to $173.4 billion. This suggests that some 96,000 borrowers, with mortgages worth almost $35 billion, will end up in the banks’ intensive care units. In March, the country’s largest home lenders allowed borrowers who had been thrown into financial stress by the coronavirus to defer their mortgages for up to six months. The major banks have already begun the process of contacting these customers to see whether they would like to begin loan repayments, with a particular emphasis on the 20% who are believed to be in financial difficulty. These borrowers have typically lost their jobs as a result of the coronavirus, which means they no longer earn enough income to meet their mortgage payments.
Australia was already hurtling towards becoming a cashless economy prior to the arrival of the coronavirus, but the pandemic has rapidly sped up the trend, according to Reserve Bank data. In May, Australian ATM withdrawals fell 30% on the previous month and were down 40% compared to a year ago. For some retail chains, cash transactions now make up less than 10% of takings. The move was expedited by stores and cafes ramping up contactless payments during the pandemic, retailers say.
One of the global insurers that have covered construction on the Adani Carmichael coal mine in central Queensland says it is reviewing its corporate policy on climate change, as the losses on the controversial project approach $800 million.
Accounts lodged with the corporate regulator this month show Adani’s Australian arm made a $279 million loss for the year ending March 31, bringing its cumulative losses including write-offs and currency movements since inception to $794 million. In the accounts, Adani warned the coronavirus pandemic could have a significant impact on the valuation of the Carmichael mine and increase its dependence on its parent company in India.
The accounts have surfaced as Bermuda-based Aspen Reinsurnace, which this week was revealed to have insured work on the mine, signaled it would review its policies over projects that contribute to climate change. “We are currently reviewing our underwriting appetite around fossil fuel but cannot comment further at this time,” the spokesman said. “Aspen understands the importance of environmental, social, and governance issues.” Aspen was one of four global insurance companies paid for underwriting works on Adani’s Carmichael coal mine and rail project. The other three, Liberty, HDI, and AXL all have said they will not provide insurance on the project after their current residual policies come to an end. Moves by insurers to rule out covering fossil fuel projects may further limit the options for Adani to insure the mine and could add to the doubts over the project’s financial viability.
Half of the workers aren’t looking forward to returning to the office and two-thirds say they won’t feel safe being back in the workplace when COVID-19 restrictions lift. More than four in five workers (88%) say they have the resources and equipment to keep working from home if they need to and 84% believe they do their work as effectively remotely as in the workplace, according to new research that reveals some workers feel hesitant about going back to the office.
Culture Amp co-founder and chief executive Didier Elzinga said many workers don’t feel safe about returning to the office and felt they could be just as productive at home. Culture Amp’s research surveyed 32,000 workers about their readiness to return to the workplace, with just 37% saying they would feel safe traveling to the workplace when restrictions lift.
Facebook has flatly rejected calls for it to share advertising revenue with local news organisations, arguing it is “not healthy or sustainable” for tech companies to shoulder the burden of propping up the media. The ACCC is developing a mandatory code of conduct to have tech companies pay for the content they host. Facebook says it is already investing in local news, and that it is not necessary for it to pay more in a submission to the Australian Competition and Consumer Commission (ACCC), the social media giant argued there was already a “healthy, competitive rivalry” between tech companies and news publishers when vying for advertising dollars, and that it was heavily investing in Australia’s media landscape. In April, the Federal Government gave the ACCC the job of developing a mandatory code of conduct to address what it described as the “power imbalances between Australian news media businesses and … Google and Facebook”.
And that’s it for this week. And next week I’ll be talking to Gavin Ward, CEO of Office National, looking at how businesses are coming up with some ingenious ways to entice staff back to work. These include perks, creative activities, wellness equipment, elaborate desktop accessories, parties, and more. And I’ll be talking to Indeed economist Callam Pickering about the latest unemployment figures.
In the meantime, you can find me on Twitter at talkingbizz, on Facebook, and on LinkedIn. And if you want, leave a comment. Wishing you all a safe and healthy week and looking forward to bringing you Talking Business next week.