This is why Australia is back in business

Back to business

After a brutal shutdown, Australia is finally reopening.

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Podcast: Episode 5 preview (Personality types)

Decision making and your ultimate goals

A sneak preview of Episode 5 of our podcast below, where we'll discuss the 9 different personality types, decision making, and your ultimate goals:

Episode 5 will be released on Monday morning.

You can listen to Episodes 1 to 4 here.

The beast is stirring

Hospital beds empty

Australia has crunched through some 33,893 COVID-19 tests over the past 24 hours, a new series high.

Testing is now extending well beyond only those with symptoms, to include those in high-risk categories and those unable to work from home. 

With the exception of the meatworks cluster in Victoria, there are now very few cases being found, with all seven of the other states and territories recording between zero and two cases today.

No new deaths were recorded today, and there have only been three deaths to date of Australians aged under 60.

Total ICU cases fell sharply again from 27 to just 22, representing less than 1 per cent of beds capacity. 

As recoveries continue to comfortably outpace new cases Australia has been one of the most successful countries in the world at flattening the curve. 

Beast stirring

It's clear that in these parts of south-east Queensland there's now comparatively little fear of COVID-19, with about a month having passed without a single case, and people are beginning to go about their business again. 

From what I hear the same is true in many other parts of Australia, including in Western Australia, Gold Coast, Sydney, and coastal New South Wales. 

I wasn't surprised to learn that New Zealand is already contemplating opening its borders to international students. 

Australia's Universities will doubtless be pushing extremely hard for a similar approach and outcome here. 

CoreLogic's advertised rents series showed a sharp drop in April as many of the empty student rentals and Airbnb lets are listed on the open rental market, naturally skewing the series median lower.

You've got to look at the story beyond the stats at the moment, though (for example, I expect US average hourly earnings will ‘boom’ by 2-3 per cent in April; but only because the stats are skewed by the lowest income earners and casuals being made redundant). 

In the short term international travel will remain severely curtailed, but over the medium term Australia's reputation has been greatly enhanced as a premier league desirable destination. 

Lucky Country

AMP's Shane Oliver penned an interesting piece entitled The Lucky Country here where he highlighted three reasons why Australia is well placed for an economic rebound.

Firstly, because we've tackled COVID-19 so much more successfully than America, Canada, Russia, and much of Europe. 

Secondly, because our fiscal response - which was originally designed for a six-month hibernation of the economy - is by far the strongest across the entire G20.

We were fortunate to be in a strong position before the crisis and this has allowed for a monster fiscal stimulus package, relatively speaking, and it’s focussed on actual spending rather than loans and guarantees which saddle companies and individuals with debts to be repaid later.

And thirdly, our main trading partner China is two or three months ahead of the rest of the world in getting back to business.

This could pull Australia along with it as infrastructure and building projects are rolled out and as the factories roar back to life.

The beast is stirring. 

This is where your financial thermostat is set

Financial thermostat

Where is your financial thermostat set?

See here for the answer (or click on the image below):

Trade surplus explodes 174pc higher (recession dodger)

Surplus rips to record high

A few weeks ago I posed the conundrum of whether the hoarding of loo roll and foodstuffs could see Q1 growth sneak over the line to come in at roughly zero, followed by, say, a -10 per cent decline in in Q2, before a return to growth in Q3.

In other words, could Australia yet again dodge a technical recession by the slimmest of margins?

As expected retail trade took the biggest leap on record in March, with turnover soaring +8.5 per cent higher as households stocked up in order to hunker down. 

Exports soar

And today we saw the March 2020 trade surplus explode by an unprecedented +6.7 billion or +174 per cent to a record high of +$10.6 billion. 

To say we've seen nothing like this before would be something of an understatement - all previous records were absolutely murdered. 

As expected imports slumped by -4 per cent, but exports ripped +15 per cent higher to $42.4 billion, driven by a lazy $9 billion of iron ore exports, and a massive +225 per cent increase in the Aussie dollar value of gold exports. 

Non-monetary gold exports soared by +$2.5 billion to $3.6 billion. 

It's reasonable to expect that the value of LNG exports will be eroded next quarter as the commodity price falls with a lag, but for the month of March export values were extremely strong. 

Staycations FTW

As might have been expected tourism credit took a horrendous -35 per cent hit as Australia's borders were closed off to international visitors. 

It's worth remembering, though, that Australia normally has about 11.6 million resident departures in a year, so we can potentially offset much of the blow by holidaying and spending more at home through 2020.  

Indeed the trade surplus from tourism services hit a record high in March. 

Overall, it's feasible that net exports could add +0.5 percentage points to GDP in the first quarter, keeping the dream run of unbroken growth alive, even if just a few weeks longer. 

The Aussie National Accounts for Q1 are scheduled to be released on June 3. 

Lowest supply in years

Listings dry up

Very few property owners are looking to sell, preferring to hold on, with new listings falling even lower than their pre-Xmas levels, according to CoreLogic's latest chart packs.

Source: CoreLogic

Total listings are now 'at their lowest level in years', so there really isn't much stock around.

Source: CoreLogic

Mortgage rates, of course, are have continued to tumble to the lowest level on record.

Source: CoreLogic

Housing markets are more likely to be impacted in terms of rentals, with Airbnb owners flooding the market with cheap rental stock, especially in inner-city locations in Melbourne and Sydney. 

Lending driven higher by NSW

Lending trends

Chris Joye of Coolabah Capital put his neck on the line in predicting that housing values would either move sideways or drop by no more than 5 per cent from their peak, before resuming their cyclical boom in the second half of 2020. 

In April he'd have been heartened to see a rise in prices for Sydney and a number of other cities, albeit not in Melbourne, where there was some price discounting (especially in the upper price quartile). 

A look back at the March 2020 lending finance figures partly helps to explain why prices have held up to date. 

Total housing lending ex-refinancing was up only modestly on the month, but was some +17.5 per cent higher than a year earlier.

The solid result was driven by homebuyer lending (ex-refi), which was +22.5 per cent higher year-on-year. 

First homebuyer numbers hit the highest level in a decade at a shade under 10,000, driven by first homebuyer incentives and another surge in New South Wales (now some +40 per cent year-on-year). 

Indeed,  the value of owner-occupier approvals to buy existing dwellings hit a record high in New South Wales. 

Every other state and territory except for the NT recorded a modest decline in homebuyer lending for the month of March. 

The Sydney skew meant that the average loan size to buy an existing dwelling hit a record high of $511,000.

Year-on-year loan sizes for the purchase of existing dwellings were up most in New South Wales (+25 per cent) and Victoria (+20 per cent), partly due to a low base effect.  

Construction loans have dropped away sharply now (down -6 per cent over the year for owner-occupiers) as new supply dries up.

And lending figures will inevitably be lower in April as bank phone lines have been like clogged arteries - due to all the refinancing and payment holidays being taken - and processing times have blown out.

But there's also been a very sharp reduction in new stock listings, so it's little wonder prices haven't budged much to date. 

Round 1 to Joye. 

The other side of the shutdown

Shutdown blues

A few thoughts on what life might look like here (or click on the image below):