Is Australia facing the ‘calm before the storm’?
Australia’s ability to escape relatively unscathed as a result of the COVID-19 pandemic could only be the ‘calm before the storm’ according to VanEck.
The country was in a recession and the ASX 200 had fallen 11% since the start of the year but stimulus measures from the Reserve Bank of Australia and the Government meant it had fared better than other countries worldwide.
According to the Australian Bureau of Statistics, household wealth rose by $165.1 billion in the June quarter and average household wealth increased by $5,881. This was driven by an increase in superannuation, direct equity holdings and deposits.
Australian household income over 20 years
However, these Government measures were set to taper with JobKeeper falling from a flat $1,500 each fortnight to a smaller one this week. It fell to $1,200 if a person worked 20 hours or more or $750 if they worked less than 20 hours, and would also fall for a second time in January 2021 to $1,000 and $650 respectively.
In a report, VanEck said: “That’s when we’ll see if the money and the confidence in the household sector holds up. With JobKeeper decreasing and the freeze on corporate bankruptcies ending, we’ll also see how much damage businesses and their ability to maintain staffing have suffered.
“The Federal Government’s idea for saving the economy also seem less than inspiring: upper income tax cuts and corporate capex incentives didn’t work last time so it’s hard to see why they will work any better now.”
It also highlighted the fractious relationship between China and Australia meant Australia would be unlikely to be able to rely on trade with China, its largest trading partner.
“The economy was pretty much stagnant going into the COVID-19 shutdown. If households or capex won’t pull us up; and government stimulus is receding; what will boost the economy? With Australia at loggerheads with its biggest export destination (a third of all exports head to China), it doesn’t seem likely trade will bail out growth and incomes.”
AUTHOR
Laura Dew
Recommended for you
Selfwealth has provided an update on the status of its scheme implementation deed with Bell Financial Group as well as whether rival bidder Svava remains in the picture.
Magellan Financial Group has reported its first half FY25 results while appointing a new chief financial officer and promoting Sophia Rahmani to chief executive.
Schroders Australia has launched two active ETFs and plans to further expand its listed range over the year ahead.
Platform Netwealth has reported its financial results for the first half of FY25, reporting an 80 per cent increase in net flows, with its CEO viewing a “huge opportunity” from private assets.
