Update on Economic Developments in Australia - Week ending 1 May 2020
Prepared by: New Zealand High Commission, Canberra
We provide an overview of significant economic developments in Australia.
- National Cabinet will take a decision on easing COVID-related restrictions expected to enable more business activity ahead of schedule on 8 May.
- $10bn of direct fiscal stimulus and economic supports had been paid out by Government in the last three weeks; $30bn more is expected to be provided in the next month.
- The Treasury said Australia had “never seen an economic shock of this speed, magnitude and shape”; there is a negative economic impact of children being at home from school/childcare; the Government has a “strong interest” in Australia being served by two full-service airlines.
- The Reserve Bank released a one page “illustrator” of its unconventional monetary policy measures.
- Ministerial statements outlining the impact of the coronavirus on the economy and the Government’s actions to date will be made in Parliament on 12 May. A set of estimates of the future economic impact of the coronavirus crisis will be released in June.
- A new “Freight Controller” has been appointed by Government to focus on inbound freight of national importance such as medical supplies.
- Government announced a $94 million support package to keep zoos and aquariums viable and ready for visitors when restrictions are eased.
- A $350 million build program for six new Cape Class Patrol Boats for the Navy was announced by the Government. The vessels will be built by Western Australian company, Austal.
- On employment and welfare:
- 650,000 employers have signed up for the JobKeeper, Australia’s wage subsidy scheme.
- 1.5 million Australians are now receiving JobSeeker welfare benefits
- 950,000 people have applied for early superannuation access; $7.9bn approved for release.
- The Australian Bureau of Statistics has released data on spending of the $750 cash payments: those over 65 are more likely to save the money than spend it.
- Stockpiling saw well over 10 percent increases in supermarkets’ turnover for the March quarter.
- Debit cards are being sent to bank customers that only have access to EFTPOS and cash to enable online and contactless shopping.
- Several companies are converting to make essential health items including Ford manufacturing face masks for health workers.
- Australia’s largest car dealership has had to make cuts despite staying open during the shutdown period. A number of mergers and acquisitions remain on ice with some going ahead attracting lower price tags.
- The National Cabinet will announce its decision on whether to ease baseline national restrictions Friday 8 May. This decision was going to be made on 11 May, but has been brought forward owing to “some real success on the health front”.
- The government has announced a $94.6 million support package to help Australia’s zoos and aquariums get through the COVID-19 crisis, as part of its $1 billion Relief and Recovery Fund to support regions, communities and industry sectors that have been disproportionately affected by COVID-19 (see here (external link)). This funding will assist exhibiting zoos and aquariums with the fixed operational costs associated with the caring of their animals, while also helping to ensure they can remain viable and ready to welcome visitors when restrictions are eased. Deputy PM McCormack and Trade Minister Birmingham explained that zoos and aquariums are a major drawcard for visitors to Australia’s cities and regional areas. Environment Minister Ley emphasised the importance zoos and aquariums play in wildlife recovery and the development of insurance populations.
- The Australian Government has appointed Air Vice-Marshal Margaret Staib AM CSC (Retired) to the newly created position of Freight Controller, as part of the Government's $110 million International Freight Assistance Mechanism (see here (external link)). Defence Minister Reynolds explained “Defence Force logisticians are some of the best in the business and their skills have never been in more demand than now”. Trade Minister Birmingham said Air Vice-Marshal Staib will focus on inbound freight of national importance such as medical supplies, while the existing International Freight Coordinator-General, Michael Byrne, and teams across Austrade and the agriculture department, will continue to focus on outbound commercially oriented freight such as premium agricultural exports.
- A $350 million build program for six new Cape Class Patrol Boats was announced by Defence Minister Reynolds and Defence Industry Minister Price (here (external link)). The vessels will be built by Western Australian company, Austal, and operated by the Royal Australian Navy. Ministers said the programme would assist with "securing Australian shipbuilding jobs and maintaining strong border protection”. The Australian Border Force currently operates eight Cape Class Patrol Boats, and the Navy operates two leased Cape Class.
- The Treasury Secretary, Steven Kennedy, appeared before the Senate Select Committee on 28 April. His opening statement can be located here (external link). Key points he and his Treasury colleagues made at the hearing included:
- “Unemployment rose to higher levels in the Great Depression but it did that over the course of a couple of years, these movements are happening in just a couple of months.”
- Australia had “never seen an economic shock of this speed, magnitude and shape"
- In regard to Australia’s measures to give early access to superannuation to financially distressed people, applications as at 28 April indicated those withdrawing had requested an average of $8,322 out of the possible $10,000 of their retirement savings.
- $10bn of direct fiscal stimulus and economic supports had been paid out in the last three weeks, including $4.3bn in payments to households and $4.5bn to small businesses. $30bn of support would be provided in the next month.
- there is a “direct link” between higher rates of home-schooling and parents withdrawing their labour, conceding schools being closed “does have a negative economic impact”.
- Treasury is advising the Government about tax and industrial relations changes as a way to boost growth.
- Treasury is advising the Government on Virgin’s decision to enter voluntary administration. The Government has a “strong interest” in Australia being served by two full-service airlines.
- The Reserve Bank of Australia released a one page “illustrator” document outlining the unconventional monetary policy measures it has used in response to the economic effects of COVID-19, how they work, and why they have been used (see here (external link)). Measures include: policy interest rate, forward guidance, asset purchases, term funding facility, and an adjustment to the interest rate on Exchange Settlement balances.
- In March, the Government announced it would postpone the May budget until October. Following calls for an interim economic update, it has since announced (here (external link)) that ministerial statements would be made to Parliament on 12 May that will outline the impact of the coronavirus on the economy and the Government’s responses to date. In addition, a set of estimates of the future economic impact of the coronavirus crisis will be released in June.
- As at 1 May, 650,000 employers have formally registered for the JobKeeper wage subsidy scheme. Details of the JobKeeper payment scheme which provides A$1,500 per eligible employee per fortnight can be located in Treasury’s factsheet here (external link).
- As at 1 May, around 1.5 million Australians are now on JobSeeker receiving unemployment and other benefits (up from 815,872 on 28 February) and that number is forecast to reach 1.7 million by September (here (external link)). Over 900,000 “claims” have been processed in just six weeks. The “coronavirus supplement” to JobSeeker benefits has effectively doubled its rate to A$1,100 per fortnight.
- The Government has been clear the JobKeeper and JobSeeker supplement schemes will conclude as legislated after six months, on 1 October. However amid some pressure not to allow JobSeeker to revert to the old dole payment of around A$40/day, PM Morrison and Finance Minister Cormann have indicated some flexibility with JobSeeker beyond 1 Oct to taper payments or extend the timeframe “a bit longer” utilising any “underspend” on the demand-driven programme.
- PM Morrison told the media on 1 May that around 950,000 people had applied for early access to a portion of their superannuation savings and $7.9bn had been approved for release.
- The Australian Bureau of Statistics released new data (here (external link)) on the impact of COVID-19 on the state of household finances and use of direct stimulus payments by Australians:
- 31 percent reported that their household finances had worsened over this period, while around 14 percent reported an improvement.
- 7.5 percent said their household lacked the money to pay one or more bills on time, and 10 percent had to draw on accumulated savings to support basic living expenses.
- 28 percent said they had received the first one-off $750 COVID-19-related economic support payment (which was paid by the Government to all income support recipients and eligible concession card holders).
- 53 percent of those who received the $750 payment had added it to their savings, with people aged 65 years and over much more likely to do so (71 percent) than persons aged 18 to 64 (37 percent).
- Major supermarkets Coles and Woolworths posted unprecedented 13.8 and 10.3 percent growth (respectively) in turnover during the March quarter compared to the same period last year owing to panicked shoppers stockpiling groceries.
- Australia’s banks will send debit cards to more than 500,000 Australians who currently only have access to EFTPOS and cash. This will enable them to shop online or use contactless transactions (now required by many businesses) during the pandemic. It is expected many of the recipients will be the elderly. This has been fast-tracked by the Australian Securities and Investments Commission.
- There are several examples of companies converting to make essential products such as PPE, hand sanitiser and medical equipment. ‘Ford Australia and New Zealand’ facilities in Australia are making (for donation) clear plastic face shields for medical workers having tested prototypes with hospitals, while continuing their global work designing and engineering pick-up trucks and SUVs (here (external link)).
- Australia's largest car dealership (with over 11 percent of Australia’s market), AP Eagers, which has continued to trade through the pandemic restrictions has laid off 1,200 of its 8200 employees, and negotiated widespread rent relief on its sites due to the decline in business activity. The company has applied for JobKeeper to retain employees where possible. This week AP Eagers also agreed to a A$25 million drop in price to A$75 million (down from A$100m) for its refrigerated logistics business to Anchorage Capital.
- Unlike AP Eagers’ sale, many other M&A transactions have been put on ice. These include big takeovers like the A$8.8 billion buyout offer for Caltex by Canada's Couche-Tard.
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This information released in this report aligns with the provisions of the Official Information Act 1982. The opinions and analysis expressed in this report are the author’s own and do not necessarily reflect the views or official policy position of the New Zealand Government. The Ministry of Foreign Affairs and Trade and the New Zealand Government take no responsibility for the accuracy of this report.