Can the Aussie economy take it anymore? We’ve had the triple threat of drought, bushfires and now COVID 19.
The RBA has just put in place another 25bps cut as we speak and further measures to help keep the lending market oiled and running. Particularly hard hit are the SMEs who are still feeling the pinch from drought and bushfire related slow-down in foot traffic and ordering. The RBA and the government have come to the party and loosened the economic purse strings to help. Whilst they’ve thrown the proverbial kitchen sink at the problem, it could all rest on timing and impact. Whilst I recognise that these fiscal and monetary measures will take a while to work through the Australian economy, it needs to hit when we can do something about it (particularly from a consumer point of view), no point in getting the consumer to spend if we are in a self-isolation period.
It’s been certainly interesting to see how three analogue threats such as drought, bushfires and COVID 19 can have on our digital economy. I think that we as people and investors are doing the best we can, but can we together ward off recession? I’m not so sure. Can we stop a depression? Maybe. S&P has warned of the huge stimulus affecting our ‘AAA’ credit rating. UBS is estimating economic recession and a rise in unemployment to over 8%. My personal belief is that 8% would be a good outcome. We’ve only just seen today Qantas let go of two thirds of their workforce yesterday. Even the Treasurer, Josh Frydenburg, today has conceded that a recession is likely.
The question going around at the moment is it is going to be a V, U or L shaped outcome. An L shaped revival is no revival at all, rather a long period of unsustained economic muddling. I’m a believer of a U shaped outcome as the global economies will show green shoots over differing periods of time. China is already showing small signs of their wheels turning economically as we speak.
We currently don’t have all the answers today and continue to monitor the markets and at-hand-information to nimbly take advantage of opportunities where they present. However first and foremost, it is important that all the eInvest team and our clients stay safe and healthy. We are here to answer any of your questions. [email protected]
Stay safe and healthy.
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Disclaimer: Please note that these are the views of Camilla Love, Managing Director, eInvest and is not financial advice.