Coronavirus: Australia’s economy won’t go anywhere until 2021, says NAB top economist
NAB chief economist Alan Oster, says the nation’s economy will not grow at all over the second half of the year, as Victoria’s harsh restrictions drag into the December quarter.
The chief economist of Australia’s biggest business lender, NAB’s Alan Oster, says the economy will not grow at all over the second half of the year, as Victoria’s restrictions drag into the December quarter at the same time as billions in income support measures are removed from households and firms.
Mr Oster agreed with Scott Morrison’s assessment on Monday that the two-week extension of Melbourne’s stage-four lockdown, followed by a slow removal of restrictions, would have a “negative impact” on the economy. “It’s certainly not going to have a positive impact,” the Prime Minister said.
The COVID-19 crisis has already wiped out more than three years’ economic growth, after an unprecedented 7 per cent plunge in real GDP in the June quarter.
With most of the country largely virus-free, Mr Oster told The Australian that the easing of restrictions outside Victoria would tip the scales in favour of a slight lift in GDP through the three months to September.
But he said winding back income support, via tapered JobKeeper and JobSeeker supplement payments, over the final quarter would push the economy back into contraction, leaving no growth over the six months.
Mr Oster agreed that Victoria’s slower-than-hoped exit from lockdown would increase the chance of Australia’s economy experiencing four consecutive contractionary quarters, which would make it the longest recession since the early 1980s, and more than twice as severe.
“You don’t get the big kick in activity until next year,” he said.
Treasury already expected a flat to negative GDP growth number for the September quarter.
ANZ head of Australian economics David Plank said the extended Victorian restrictions made it more urgent for the federal government to announce major stimulus spending in the October 6 budget.
His bank is tipping upcoming budgets from the commonwealth and states will include spending initiatives worth $180bn over the four-year budget horizons.
As businesses warned of further failures and job losses as a result of the delayed reopening in Victoria, there were signs the country’s labour market recovery stalled in August.
The number of job ads lifted by 1.6 per cent last month, after surging by close to 20 per cent in July, according to ANZ data released on Monday. That left job ads down 27 per cent since February, and by 30 per cent against August 2019.
With Victoria accounting for more than a quarter of the country’s pre-pandemic employment, ANZ senior economist Catherine Birch said the stage-three and stage-four restrictions in Melbourne and regional Victoria “have undoubtedly put the brakes on” the jobs recovery.
“We expect outright falls in national employment in August and September,” Ms Birch said.
Tuesday’s NAB business confidence survey is likely to show continued pessimism among firms outside of Victoria.
Savers will pay the price once RBA cuts rates, says Morgan Stanley
Major lenders will cut their rates on savings accounts to prop up their margins once the Reserve Bank begins to cut interest rates, Morgan Stanley predicts.
RBA’s Covid funding program cost $9bn
The RBA’s Term Funding Facility came at a cost of $9bn to the central bank and it has learnt valuable lessons that could help to shape any future program, according to an internal review.