A nation at the Covid crossroads

NSW Premier Gladys Berejiklian faces a decision over to end or extend Sydney’s lockdown. Picture: NCA NewsWire/Joel Carrett

This has turned into a – very – long weekend on the three key fronts: the virus, the economy and for investors.

With the virus – and the economy – the whole country is suspended between Victoria’s zero daily cases and NSW’s, encouragingly, less-than a daily-dozen actually ‘out there’.

Just as Victoria’s pain last year was every Australian’s pain – albeit, true: Victorians had migraines, the other 20m had mild headaches – so now NSW’s pain is similarly the case, but so far at lesser pain levels.

\People are seen exercising at Bondi Beach in Sydney. Picture: NCA NewsWire/Bianca De Marchi

But if – and right now it’s encouragingly still a big if – the cases continue, or worse but unlikely expand, and the lockdown is extended beyond next weekend, the pain will get worse. For all of us.

For the immediate future, the ‘Grand Four-Point Roadmap and Plan’ unveiled by the prime minister after Friday’s National Cabinet is utterly irrelevant.

The only thing that kicks in pretty quickly is the halving of commercial flights. If you are an Aussie stranded overseas and desperate to get back, good luck on getting on one of ScoMo’s special flights and a fortnight to follow in ScoMo’s six-star resort outside Darwin.

Everything else in the plan is only triggered by much more pervasive vaccination across the nation, and that’s at least six months away. Until then, it’s more of the same: a case leaks from hotel quarantine and lockdown is the answer.

So right now, the nation is on NSW case watch over the next few days.

NSW’s critical importance will be emphasised by the Roy Morgan jobs and jobless numbers coming out Monday.

They will show unemployment in Australia’s biggest and most economically important state had dropped sharply to 7.3 per cent in June – easily the lowest of all the states.

But, and it’s a big but, that was before the lockdown kicked in. And, it’s just as important to remember, that now there’s no JobKeeper pumping money into pockets to keep spending. Only a much reduced JobKeeper 2.0 and only after the first week.

The Morgan figures are both much more timely and more realistic than the official ABS jobless numbers.

These Morgan numbers give us the June figures; we will only get the ABS June figures in two weeks and then they will only be for the first two weeks of June.

The Morgan figures have a jobless rate of 9.4 per cent; the last ABS number was a much more appealing 5.1 per cent (for May). But under the ABS measure you weren’t jobless if you worked for just a single hour in a week.

Investors – and everyone really – are caught between the latest jobs numbers out of the US overnight Friday and the Reserve Bank’s pivotal meeting Tuesday.

As I’ve explained the monthly US jobs numbers are the most watched and so the most important statistic produced anywhere in the world.

That’s because Wall St literally ‘bets the bank’- and their fat bonuses – on the numbers each month.

Crudely, ‘good jobs news’ was ‘bad market news, If the jobs numbers were good, that would signal the Fed might start to raise interest rates and higher rates mean lower share prices.

AMP’s Shane Oliver Saturday described them as Goldilocks not-too hot not-too cold numbers – pointing to a healthier US economy but not too healthy which would add to already rising fears of rising US inflation and so the prospect of the Fed hiking.

I broadly agree with that, but I would add a rider. There’s no prospect of the Fed hiking anytime soon – whether these or any other numbers came out ‘just right’ or ‘too hot’.

The Fed is totally hostage to keeping the Wall St party – and bonuses – roaring.

It thinks for ‘good reasons’- that a plunge on Wall St, GFC 2008-style, would be devastating for the US economy.

I disagree; it’s actually drunk the Wall St Kool-Aid.

That leaves us with Tuesday and the RBA.

The two big things we know for certain is that it won’t touch the 0.1 per cent all-but zero official rate which is the reason why home loans are at 2 per cent, and that it won’t touch it until 2024 at the earliest.

Nothing has changed to alter its thinking on that. And NSW is right now still “on hold”.

The big things that are in train for Tuesday are largely technical – of interest to the pros, but will play crucially into things that matter to ordinary Aussies.

First is the ‘three year bond’ the RBA will target for keeping its yield at the same 0.1 per cent of its official rate. Now it’s the April 2024 bond; it will stay with that.

The second is its QE program – the buying of bonds to indirectly offset the budget deficit. It will stay with it but modify it.

This is a pivotal weekend. We are headed for an ‘interesting’ week.