Is Australia’s recession over before it started?

Life is starting to get back to normal, the lockdowns are lifting, there are people in the streets, in fact I went back to one of our favourite café’s on the weekend.

All signs continue to indicate that Australians want to get back to normal.

But last week we learned we’re in a recession.

How bad will it be and how long will it last?

I’m sure by now you’ve read some of the worst-case scenarios, but there are signs that maybe it won’t be as bad as many expected.

Now I’m not denying that many Australians are feeling financial hardship and many businesses are doing it really tough.

Sure there is the technical definition of two-quarters of negative GDP and while we may not be there yet, but other factors that are recessionary include:

1. Falling consumption.
2. High unemployment
3. Collapsing retail sales
4. Declining small business income

So, let’s agree we’re in a recession, yet some recent data released by ANZ Bank suggests that maybe we may already be on the way up.

Remember the GDP statistics recently released were for the March quarter and in a few weeks time the June quarter will be over, but we won’t see the GDP statistics for this current quarter till September and by then it’s quite possible life will look more normal.

Why do I say this?

A recent economic research note by ANZ Bank Suggests that Australians want to get back to normal.

People are out and about, booking restaurants and looking for places to visit.

They are searching for cars to buy and thinking about home renovation.

Australian mobility data has continued to lift; and if things continue at the same pace, driving will be back at pre-pandemic levels over the next month or so.

Foot traffic in Melbourne’s CBD suggests that businesses are keeping their working from home policies largely intact, with the lift in activity during the week substantially lagging weekend numbers (Figure 2 and 3).

If Melbourne is representative of most major cities, this will have flow-on implications for brick and-mortar retail.

Restaurant bookings across Australia have surged in the last fortnight.

From being down around 90% y/y a fortnight ago, bookings over the last week are now down on average around 40% y/y.

This sharp lift in bookings coincided with New South Wales and Victoria easing restrictions on 1 June, suggesting restrictions rather than virus concerns were holding patrons back.

Consistent with this, ANZ-observed spending data show dining out spending rose.

Interest in domestic vacations has increased, with searches for “Airbnb” rising sharply back to almost pre-pandemic levels.

There were further encouraging signs that the labour market has not deteriorated materially further.

Internet searches for “unemployment benefits” have largely returned to normal, and searches for “cancel centrelink” are still elevated after spiking in early May.

Though concern over COVID-19 itself has largely subsided, Australians’ interest in and concerns about the economic appear to be high.

This was reflected in the first week of June, with more searching for “recession” than during March, as Q1 GDP growth came in negative.

Although there may still be some concern for the economy, there are other signs Australians are feeling reasonably confident.

Seasonally adjusted searching for car sales has surged in the last few weeks and remains elevated .

Given cars are such a big ticket item for households, this is a positive sign that Australian are feeling more confident about their economic future.

 

Though containing the spread of COVID-19 exceeded expectations, there is still a long way to go for the economic recovery, during which time fiscal and monetary policy support will be essential.

The recent HomeBuilder policy has certainly caught attention, with searches for “home renovations”’ surging to a record level after the announcement  suggesting perhaps there will be some bring forward.

Source: Economic note by ANZ Bank for each institutional, market and private banking clients. This information is general in nature and does not constitute personal advice.

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from Property UpdateProperty Update https://propertyupdate.com.au/is-australias-recession-over-before-it-started/