Keep your chin up, a ü shaped economic recovery is on it's way soon.

“We’re pretty resilient when it comes to a global crisis, so we’ll pull up our socks, strap on our boots and get on with the job.” (quote: me)

Australian June, 2020 GDP Snapshot - LinkedIn Article, September 2nd 2020

Don't believe we've reached the economic cliff with numbers released today, there's many opportunities to overcome some of the negatives we're facing here in Australia, with some positives we can look forward to seeing during the current CFC (corona financial crisis).

"ABS Media release, 2nd September 2020"       

Economic activity fell 7.0 per cent in June quarter

Australian Gross Domestic Product (GDP) fell 7.0 per cent in the June quarter, the largest quarterly fall on record, according to figures released by the Australian Bureau of Statistics (ABS) today. This follows a fall of 0.3 per cent in the March quarter 2020.

The combined effect of the pandemic and the community and government responses to it led to movements of unprecedented size, not only in GDP but also in many of the other economic aggregates in the June quarter National Accounts.

Head of National Accounts at the ABS, Michael Smedes said:

“The global pandemic and associated containment policies led to a 7.0 per cent fall in GDP for the June quarter. This is, by a wide margin, the largest fall in quarterly GDP since records began in 1959.”

The Government's response to support Australian households and businesses resulted in record payments from the public to the private sectors.

The household saving to income ratio rose to 19.8 per cent from 6.0 per cent, driven by the fall in consumption expenditure. Hours worked fell a record 9.8 per cent, outpacing the record 2.5 per cent decline in wages which were supported by JobKeeper payments.

Social assistance benefits in cash rose a record 41.6 per cent, due to increased number of recipients and additional support payments.

Australia still ahead of most OECD Countries

New Mining Boom to drive Economic Stimulus in Australia 2020-2030

Former Mining States (WA, SA, NT & Qld), has had it tough since the GFC and Mining Boom and Investment, ceasing in 2009/10, having over 10 years of poor economic activity and high unemployment of around 7% for the former mining states, well before Covid-19. 

Opportunities to drive economic growth in the re-instated mining states and an increase of iron ore and other mining commodities rising in prices, due to Brazil almost ceasing mining production due to Covid-19 and Australia picking up production to supply countries like China.

Federal Government forward budget estimates in commodity prices is currently at only $55 per tonne and yet the current price per tonne is between $95 to $110 and future prices may exceed $120 per tonne (including the $9 per tonne in shipping costs). 

Clearly we could see companies like Rio Tinto (WA) and BHP (SA) ramping up production and possible further mining expansion in these states, over the coming 3-5 years.     

Any rise above $55 per tonne will generate hundreds of millions of dollars in additional revenues for the mining states (WA, SA, NT & Qld) and additional tax revenues for the Federal Government to continue to provide economic stimulus if needed, but we can’t rely on continued government stimulus to prop up the national economy and private investment will desperately be needed to increase by 2021/22.  

The mining states, although some negative numbers above, is 1% higher in economic growth for the June, 2020 quarter GDP figures compared to the non-mining states, with further opportunities to grow economic numbers further, with a refreshed mining boom in SA, WA, NT and QLD for the 2020 to 2030 years and possibly beyond.

Main features production chain volume measures, Australian GDP, June Qtr, 2020 (ABS, Today September 2, 2020).

Mining +0.2%

This increase was driven by a:

• 1.4% rise in Iron Ore Mining driven by increased global demand
• 2.5% rise in Other Mining due to strong production volumes in gold and copper following maintenance disruptions in the previous quarter

This was partly offset by a:

• 0.7% fall in both Coal Mining and Oil and Gas Extraction reflecting reduced global demand. Exports of coal (-8.3%) and other mineral fuels (-1.7%) declined.

Future Investment and Employment Growth 2020/22

Clearly looking at the above numbers in Market Sector Growth during Covid-19, we could see further opportunities, to either being employed, or placing further investment in the following sectors:

• Future Mining
• Finance/Insurance
• Education and Training
• Public Service and Infrastructure
• Retail (Online, Click and Collect either Distribution Warehousing, or Instore workers).

• Financial and Insurance Services up 0.7% (ABS, September 2, 2020)

Finance rose 1.7% reflecting a significant rise in deposit balances as businesses and households increased liquidity in response to Covid-19. Businesses sourced additional funding through equity capital and debt issuance.

Cash inflows from the early release of superannuation and social assistance payments strengthened household deposit accounts.

Australian Bureau of Statistics data released today, reveals that the household savings ratio increased to 19.8% off the back of JobKeeper and increased JobSeeker payments.

With households saving nearly a fifth of their income in the June quarter, this is up from 6% in the March quarter, and up from just 2.5% in 2019’s June quarter.

• Education and Training up 1.4%

Many people affected by Covid-19 either by being unemployed, or receiving JobKeeper or JobSeeker are most likely upskilling and completing online training or development into other career roles, many year 12 leavers in Australia are also receiving places in Australian Universities due to a lack of foreign students entering Australia.

State and Federal government’s are also ramping up investment in apprentices and traineeships in trades such as light manufacturing and home services including, plumbing and electrical jobs.  

• Public Sector Administration and Infrastructure Spending up 5.4%

We’ll continue to see more spending in APS numbers to manage additional infrastructure spending and Covid-19 spending in Health and Public Safety.

In the coming days/weeks we’ll see further numbers released by both State and Federal governments in infrastructure spending after the release of June’s GDP numbers.

The October Federal Budget will provide further guidance on JobKeeper and JobSeeker spending and additional infrastructure investment for the 2020-25 years. 

Current GDP Public Sector Investment by State (SA) +19.5%

Current GDP Public Sector Investment by State (VIC) +24.4%

Current GDP Public Sector Investment by State (NSW) -0.3%

Current GDP Public Sector Investment by State (QLD) +4.6%

Current GDP Public Sector Investment by State (WA) -1.7%

The other State and territories; Tasmania, ACT and Northern Territories showed very little Public Sector spending, well below 0.1% in both State and Federal Government’s infrastructure spending.

Household Spending Numbers (ABS, Retail)

Looking at Consumer Spending numbers, retail will continue to thrive as many, either forced in lock down, working from home, or use to home delivery services, we’ll continue to see more retail spending as long as JobKeeper and JobSeeker payments continue.

Some ABS Highlights (compared to the June, 2019 Qtr):

• Booze Spending up 17.4% (Wagon spending down 82.6%)  
• Home Furnishings, Home Office up 13%
• Telecommunications up 4.7%
• Education Spending up 1.4%
• Retail Sales up 12% and climbing.

JobKeeper and JobSeeker 

Without JobKeeper and JobSeeker Federal Government stimulus of over 100 billion dollars, we could of seen unemployment of over 20% and Australian GDP of around -15% instead of today’s number of -7%.  

In the coming months we’ll see further numbers released by the Federal government in JobKeeper and JobSeeker spending, after the release of the September GDP numbers to be released in December 2020.

Victoria will continue to rise in JobKeeper numbers as the state continues to be forced in lockdown.

The October Federal Budget will provide further guidance on JobKeeper and JobSeeker spending and additional infrastructure investment for the 2020-25 years. 

Always look forward to further discussions.

Stay safe and get tested if you feel unwell.

Chin up Victoria :)

Cheers,

Andrew