First recession in 3 decades
News that is rather old hat now, of course, but the Australian National Accounts reported a sharp contraction in the June 2020 quarter.
Assuming the small contraction of -0.3 per cent in the March 2020 quarter isn't later revised up, then this confirms the two successive quarters of negative growth which traditionally represent a recession...the first in three decades for Australia.
The June quarter contraction was a whopper, with the national and state borders - and indeed much of the domestic economy - effectively shuttered for business due to the COVID-19 virus.
In the June quarter output in the Aussie economy fell 7 per cent in seasonally adjusted terms.
Nominal GDP growth was -5.9 per cent over the year.
And there were broadly similar results for gross national income and disposable income.
Of course this has all been known about for many a long week now, and Aussie stocks rallied by around +1.8 per cent through the day's trade.
Shape of the recovery?
The big question, of course, is what shape with the recovery be, and how fast will confidence rebound once Aussies are free to travel and spend again as they wish?
Certainly the range of stimulus measures put in place have been both swift and vast, while many Aussies have accessed their superannuation early too.
Intuitively, though, the restrictions in Melbourne must be doing untold damage to small businesses, many of which will surely never reopen after the state's lockdown ends, whenever that proves to be.
The Reserve Bank's own forecasts suggest that core inflation won't get back to target for several more years, and the unemployment rate is forecast to remain at around 7 per cent even by the end of 2022.
For those of us fortunate enough to remain in work - or in business - the outlook may not be quite so bad...
A few positives
Firstly, China's economy is firing, and iron ore prices recently ballooned to six-year highs, so Australia can potentially coat-tail its way out of recession, just as we did during the Rudd years.
Secondly, there may be plenty of pent-up firepower for consumer spending once Aussies are allowed out and about again, and once consumers have the confidence to spend freely again.
The stimulus packages have, on the whole, been pretty well targeted, and many Aussie dollars have been trapped at home due to the international travel restrictions.
The household saving ratio accordingly sky-rocketed to 19.8 per cent in the June quarter.
And thirdly, there has been a huge rush for mortgage refinancing, as homeowners looks to switch to cheaper mortgage rates, a trend which will effectively perform the role of monetary easing as it washes through.
The interest payable on dwellings has already plunged to the lowest level in 14 years, and that's without adjusting for the enormous growth in Australia's population and number of households over that time.
The bulk of established homeowners now have the luxury of extremely comfortable serviceability on their home loans, while more recent buyers may enjoy the benefits as and when they are able to refinance.
I haven't read much media yet, as I prefer to look at the numbers first for myself, but this is due to be an interesting ongoing debate, well summarised by Euan Black at The New Daily here.
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James Foster highlights the different recovery in mobility around Australia's cities here, with Melbourne lagging enormously at this juncture.
