Spending data boosts hopes for economic recovery

Hopes rise the worst of the COVID-19 economic downturn may be over.

The RBA has revealed concerns that COVID support measures may be providing artificial price support to some riskier asset classes. Picture: AAP

An increase in credit card spending, rises in the number of people working, and new research showing people are poised to ramp up spending on entertainment and retail have lifted optimism the worst of the COVID-19 downturn may be over.

Customers of the Commonwealth Bank, the biggest financial institution in the country, spent 6 per cent more on their credit and debit cards over the week to June 12, up from 5 per cent a week earlier, according to the bank’s own analysis.

Separately, Roy Morgan’s weekly confidence index rose for a 10th time in 11 weeks, which left the index 49 per cent above the record low of March 29.

ANZ economist David Plank said it was a “solid turnaround given the impact the pandemic lockdowns have had on employment and wages.”

The CBA said that a complementary analysis of its customers’ spending in May, that included internet search patterns, showed a sharp increase in plans to spend on entertainment and retail.

“Retail spending intentions jumped in May – as the re‑opening of the economy and the rise in income flowing into CBA accounts saw spending improve,” said CBA chief economist Stephen Halmarick. “While we know that the Australian economy is in recession, the path to recovery is becoming clearer.”

The positive news came as the local share market index surged almost 4 per cent following news the US Federal Reserve would start buying corporate bonds to increase liquidity in financial markets.

Tyro Payments, which processes card transactions for businesses, said its volumes were 6 per cent higher in the 12 days to June than in the same period last year. Tyro had processed over $19bn in transactions so far this year, 16 per cent higher than over the same period last year.

The ABS said Australian Taxation Office data on business payrolls showed the number of jobs increased by 1 per cent last month. Total job losses between mid-March and May 30 were now 7.5 per cent, pointing to a gentle recovery from the 8.5 per cent drop by mid-April.

The Reserve Bank also struck a slightly more optimistic tone on the market, in the minutes of its June board meeting, released on Tuesday.

“In some of the industries that had been most affected by the restrictions on activity, the number of jobs had stabilised or increased a little, suggesting that the total decline in hours worked may be less than had previously been feared,” the minutes said.

The RBA expressed some surprise share prices had climbed so fast given the prospect of a severe recession

“Members discussed the sharp recovery in the prices of risky assets since their lows earlier in the year and whether this was warranted given the large decline in global economic activity and the highly uncertain outlook,” they said.

“In some instances, households had received more income than usual,” they added, referring to the significant increase in government welfare payments including JobKeeper and the supercharged jobless benefit, JobSeeker.

“Lower fuel prices, free childcare and other initiatives, as well as more limited consumption opportunities during the period of restrictions, had also reduced living expenses for many households,” they added.

The better economic news extended to lending. Fintech lender Wisr said its approved new loans in May were almost 50 per cent greater than in April by value.

“The volume of requests for support has now returned to pre-COVID levels, with only two requests in June 2020 to date,” the company said in a statement. Almost 7 per cent of the lender’s outstanding loans have had their interest payments deferred, it also said.

Anthony Nantes, Wisr chief executive, said the impact of COVID-19 on Wisr had been “very manageable”.