2 Oct 2020
Australia awaits bumper budget annoucement
Markets
- The US market rose this week whilst all other major markets weakened.
- In local stock news, Premier Investments, which owns large clothing chain retailers, reported a near 30% rise in full year profit, aided by government support and online sales, which jumped almost 50%. The strong result didn’t stop management threatening shopping centre landlords with store closures if rents aren’t reduced. Can’t have it both ways….
- Bank of Queensland expects to book a $175 million expense from bad loans for the full year, due mostly to the virus. Data has shown that 9 out of the 10 suburbs nationally with the most deferred loan repayments are in Queensland. The Queensland border remains shut.
- Santos had its controversial Narrabri coal seam gas project approved by NSW authorities, bolstering their chances of federal approval. Yes, there are environmental concerns, but we can’t shift off coal without gas.
- Australia’s largest banks have put aside more then $7 billion in bad loan provisions related to the virus. 780,000 customers representing $240 billion of loans had opted to defer their repayments. This month those customers are being encouraged by banks to restart their repayments under existing or adjusted arrangements or ask for another extension.
Economics
- Treasurer Josh Frydenberg announced significant changes to lending practices by the banks which would see borrowers being held more accountable for providing accurate information replacing the “lender beware” rules. Green light for the banks to lend and lend freely. Credit boom here we come.
- Treasurer Frydenberg is expected to announce a growth boosting bumper budget on October 6 that includes bringing forward income tax cuts, new infrastructure and energy infrastructure spending, business incentives including wage incentive schemes to encourage hiring. CBA is estimating a cash deficit of $220 billion or 11.3% of GDP.
- The date of the postponed federal budget coincides with the RBA’s October meeting, so the RBA may push back any new announcements to the November meeting. It is widely speculated that the RBA may be looking to cut the cash rate further and increase their stimulus programs.
- The Australian Treasury forecasts that our population will be 11.2% lower by June 2021 compared with pre-virus projections, equivalent to around 400,000 fewer residents. That has massive implications for economic growth and the housing market, particularly rental vacancies.
- Australian consumer confidence has risen for a fourth straight week as restrictions continue to be lifted in each state and the likelihood of cross-border travel nears.
- Australian building approvals fell by 1.6% in August to be just 0.6% higher over the year. Private house approvals rose by 4.8% whilst multi-unit approvals fell by 11%. Private sector credit was flat in August and annual growth eased to 2.2%.
- Australian dwelling prices fell by 0.2% across the 8 capital cities in September. Annual growth has now eased to 4.9%. Melbourne posted the sharpest September decline whilst Sydney prices also fell. Prices rose in all other capital cities.
- The number of job vacancies in Australia rose by almost 60% in the August quarter, the largest increase in the 40-year history of the survey, following a large fall in the May quarter. The level of job vacancies remains more than 9% below levels early this year.
- A key US survey showed consumer confidence surging past expectations this month with the largest monthly gain in 17 years.
- European data pointed to persistent weakness in consumer prices in the Eurozone in September. The news followed a very dovish address to the European parliament by central bank President Christine Lagarde.
- Other economic data showed improvement with Chinese manufacturing data slightly better for the month, whilst German retail sales rose strongly in August with July’s figures also revised up. French consumer spending came in above expectations whilst German jobless numbers fell slightly.
Politics
- The first US election debate was held in Ohio with mixed reactions across the globe and no clear winner. It’s fair to say the debate was more a spectacle than of any substance with both men trading barbs whilst trying hard to sound coherent. It was tough to watch.
- Reports out of the US are indicating that lawmakers were making progress on a US$2.2 trillion stimulus package that could be voted on as soon as next week. The White House countered with a US$1.5 trillion-plus proposal. Hopefully, we’ll see a deal soon.
- US President Trump named Amy Coney Barrett as his Supreme Court nominee. She will now be grilled by a committee before being confirmed by the US Senate.
- Covid-19 cases in Europe continued to rise, with France and Britain setting new daily records, whilst the Spanish government recommended reimposing a partial lockdown on the city of Madrid. Death rates remain significantly lower than the first wave clearly showing greater acceptance and use of readily available treatments and better preparedness for those most at risk. New daily infections in Australia continue to fall.
- PM Scott Morrison has slammed union “extortion”, with the Maritime Union of Australia action holding up 90,000 containers on 40 ships, making it clear that it would not be tolerated for much longer. Options include sending in the troops or re-directing those ships to more friendly terminals.
- UK Prime Minister Boris Johnson’s leadership came under attack as issues arose regarding the government’s virus emergency powers and his controversial plans to rewrite the Brexit withdrawal agreement and hence break international law.
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