-----
There is really only one story this week and
its impact around the world – COVID-19.
I the US President Trump has suddenly
realised he has a serious problem with major cities locked down and economic
activity taking a huge hit. He also knows he is really at risk of loosing the
election later in the year.
In the UK the lockdown has been dramatically
increased a number times and looks to continue in intensity as the death toll
rises.
In Australia – stimulus / survival is the
name of game and we are also seeing progressively more desperate actions as the
case count rises. Now deaths are 12 and 2700+ cases. Not winning so far sadly - despite tighter restriction on everything. (Thurs pm)
-----
Major Issues.
-----
Why retirees fear a market plunge
Darren Beesley
Mar
16, 2020 – 9.44am
The spread of coronavirus has been followed by some of the biggest plunges in sharemarkets
since the global financial crisis, here in Australia and around the world.
There’s nothing new about a market
correction, but for those close to retirement it can be a nerve-racking
experience. If you’ve checked your superannuation balance over the past week,
you may need a stiff drink.
For investors, or anyone with
super, the general advice is to hold your nerve.
Selling out at a low will lock in
losses. Market corrections are quite
normal and
sharemarket pullbacks provide opportunities for investors to buy cheaper stocks
that will rise in value over time.
-----
The RBA's job is to back banks, not bail out gamblers
Mar
17, 2020 – 12.00am
It’s quite a while since I was at
the Reserve Bank, but one of my tasks there was to draft replies to letters
received. So let me try my hand at responding to Christopher Joye’s "Virus gets upper hand in battle against central banks" (AFR, March 13).
Dear Christopher,
Thank you for your letters: the
RBA is always open for gratuitous advice.
First, to the pandemic itself. You
say that "markets have never had to price a real public pandemic".
Actually, there have been a number of comparable epidemics. The Spanish flu at the end of World War I killed
30 to 50 million people. The Asian flu in the 1950s (1 to 4 million deaths)
didn’t seem to affect financial markets much, but the Hong Kong flu in the '60s sent the S&P down
by more than 20 per cent. What about SARS, MERS and Avian flu? If this one is having more
impact, perhaps it is because financial markets have made themselves more
fragile, with multiple layers of risk-taking and excessive gearing.
You want to fault governments for
their containment strategies. Who is doing better – Singapore, Taiwan, South Korea and (belatedly) China, with their active containment,
or Italy and Iran with their tardy inadequacies?
-----
Fear takes over: The chart that shows you just how scared investors are
Stephen Bartholomeusz
Senior business columnist
March 17, 2020 — 11.53am
The 12 per cent fall in the US
sharemarket
probably says most of what we need to know about the levels of fear coursing
through financial markets but, if you wanted a more precise guide, the dramatic
spike in the "fear index" on Monday provided it.
The VIX index, which is a
forward-looking index that effectively reflects the market’s expectation of
volatility over the next 30 days, and therefore provides a measurement of
market risk and investor sentiment, soared on Monday to near-record levels.
At 82.69 it was almost 25 points,
or about 43 per cent higher than its Friday reading and represents a record
closing high. It also puts it within sight of the 89.53 record intraday level
it reached on October 24, 2008, when it appeared the world’s financial system
was about to collapse. Its long-run average is only 19.2. Before the initial
emergence of the coronavirus in mid-February it was below 15.
-----
Retirees to get super relief, landlords urged to cut rents
Mar
21, 2020 – 12.01am
Retirees will be able to keep more
of their superannuation nest egg rather than be forced to sell shares into a crashing market, under plans to reduce the amount
they must compulsorily draw down each year.
The measure is set to be announced
as part of a new and substantial coronavirus assistance package that will also
include a multibillion-dollar expansion of the welfare safety net to catch all
workers affected – even those not officially sacked but just stood down.
The financial impact of the crisis
has become so severe and uncertain that Prime Minister Scott Morrison cancelled
the federal budget scheduled for May 12 and pushed it back to October 6, by
when the government hopes the turmoil will have ended and it "can set out
the path to economic recovery".
At the same time, Treasurer Josh
Frydenberg lifted the debt ceiling from $600 billion to $850 billion "to
ensure it has the capacity to deal with the ongoing economic impact of the
coronavirus".
-----
The Smart Investor crisis survival toolkit
From
superannuation to property to investment markets and aged care, our team of
experts explain how to handle a crisis.
Contributors
Mar
21, 2020 – 12.00am
The economy is taking a hit as
people stay at home to curtail the spread of the coronavirus.
As customers shy away from
restaurants, cafes and shops, and are banned from entertainment venues, company
revenues are taking a hit even though costs remain the same.
Amid the fear more companies will
have no choice but to stand down or lay off workers, the
government is stepping in with a package of measures to support the economy.
These measures, as well as
developments in the broader economy, are expected to affect investing,
superannuation, property and aged care.
We asked our Smart Investor
experts for their views on how to manage the unfolding crisis. This is general
advice only. Here's what they had to say:
-----
Markets learn the hard way: don’t fight the RBA
Mar
20, 2020 – 2.06pm
This was the official family’s
finest hour – Australia’s own “Draghi moment” – where historic tensions between
Scott Morrison’s government, the Reserve Bank of Australia, the corporate and
banking regulators and the banks dissolved as Team Australia came together to
battle the greatest economic and human challenge the nation has faced since the
Second World War.
Anyone who works in markets
understands that this unprecedented and globally synchronised depression in
demand and supply – wrought by an entirely alien pathogen – poses far greater
hazards than the global financial crisis.
As I repeatedly explained in
private communications
with the government, the RBA, the banks, and other regulators in late February
and early March, the source of this shock was "the inability of markets to
price the extreme uncertainty inherent in a 1-in-100 year, deadly global
pandemic, which is precipitating outright market failures that are killing
liquidity, solvency and ultimately the global economy”.
“Again, this was predictable a
week ago [as I had outlined] and is a classic case of Arrow's market failure
due to extreme information asymmetries.
-----
Government, banks go all in to stave off economic disaster
The
government's initial stimulus package failed to make an impact. Now Canberra,
the RBA and the banks are going all in.
Mar
21, 2020 – 12.00am
Australians are facing their
harshest economic challenge since at least the 1991 "recession we had to
have" and quite possibly the Great Depression of the 1930s.
Certainly, the coronavirus health
and economic crisis will be a much bigger local shock than the 2008-09 global
financial crisis, which left an additional 193,000 Australians unemployed and
saw the jobless rate jump 1.9 percentage points to 5.9 per cent within just 10
months.
Strict social distancing rules,
the lockdown of Australia's borders and huge uncertainty are quickly suppressing economic
activity. While Scott Morrison on Friday tried to reassure the public
"there is a way through", it is becoming clear the government's
health and economic objectives are – unavoidably – at odds.
"We are in uncharted
territory," says Andrew Charlton, an economic adviser to former prime
minister Kevin Rudd during the GFC. "We have gone from crisis prevention
to crisis mitigation in only one week."
-----
Why you can't rely on your dividends
Many
income investors will be tested financially like never before as savings rates
and dividends fall.
Mar
21, 2020 – 12.00am
Investors watching their share
portfolio tank as the COVID-19 panic escalates should brace for widespread
dividend cuts as corporate profits tumble.
With economic recession seemingly
inevitable, more companies are withdrawing their revenue and earnings guidance
given the uncertainty of a once-in-100-year pandemic that is devastating the
global economy and financial markets.
Boral, BlueScope Steel, GPT Group,
Mirvac Group and Nine Entertainment (owner of The Australian Financial Review)
were the latest this week to withdraw guidance.
-----
Market meltdown ‘the worst ever’
The
most brutal selldown in Australian stockmarket history has left share prices,
super funds and share portfolios trading at fractions of their former value as
the financial impacts of coronavirus continue to carve through the market.
Even
after a rally on Friday that led to double-digit gains for some stocks, the
violent plunge over the past month has caused eye-watering losses for some of
corporate Australia’s most recognisable names.
For
long-term market watchers, the coronavirus collapse has quickly established
itself as a rival to the infamous market falls such as the global financial
crisis, the Asian financial crisis and the 1987 market crash.
MST
Marquee investment strategist Hasan Tevfik said there was a case to be made
that the meltdown was the most severe seen on our shores.
-----
Bushfire Crisis And Climate Policy
-----
No entries in this category.
-----
Coronavirus And Impacts.
-----
Fortress Australia: All overseas arrivals must self-isolate
Mar
15, 2020 – 2.48pm
Everyone arriving in Australia
from overseas from midnight on Sunday must undergo self-isolation for 14 days
as part of a drastic escalation of the nation's response to the coronavirus pandemic.
As well, cruises ships from
foreign ports will be banned for at least 30 days and the government will
formally adopt a ban recommended on Friday on non-essential, static mass
gatherings of more than 500 people.
Limitations on the size of
gatherings in enclosed areas such as cinemas are likely to be made on Tuesday,
as will restrictions on access to aged care facilities. It is understood a
limit of 100 is being contemplated on enclosed gatherings.
The new social distancing
provisions also means an end to shaking hands.
-----
Does closing schools slow the spread of coronavirus? Past outbreaks provide clues
As the societal disruptions from
COVID-19 spread and intensify, a question for many in the United States is,
what about schools? Schools in Japan, Italy, parts of China, and elsewhere have
shuttered. A small but increasing number in the United States are following
suit, whether for a day, a week, or longer.
But does shutting a school help a
broader community, especially when the role played by children in spreading
COVID-19 remains uncertain? Nicholas Christakis, a social scientist and
physician at Yale University, thinks it does, but he recognizes that questions
around closing schools are difficult. Christakis studies social networks and is
developing software and statistical methods to forecast an epidemic’s spread
before it happens.
-----
COVID-19 may be more destructive than the Lehman crisis
Coronavirus
has triggered a collision of unstable debt and an oil price crash: recession is
imminent.
Ambrose Evans-Pritchard
Mar
11, 2020 – 12.44pm
The coronavirus has set off two
parallel "doom loops". An oil price crash is colliding with an
unstable edifice of corporate debt.
At the same time the closure of
Italy's economic heartland is triggering a surge in Italian risk spreads and an
intertwined collapse in European bank shares. The twin shocks come just as
markets wake up to the grim reality that the US and Europe have missed their
chance to control the pandemic.
A global recession of some form is
no longer a tail risk. It is imminent and inescapable. That is the screaming
verdict of safe-haven bond markets. The collapse in yields on 30-year US
Treasuries to historic lows of 0.51 per cent is a red warning of deflation.
In Europe the trap has closed
already. Bund yields fell to minus 0.87 per cent on Monday. The Stoxx Euro 600
banks index slid 11 per cent and is now below the depths of the Lehman crisis.
-----
ASIC issues emergency trading rules with volumes soaring
By Lucy Battersby
March 16, 2020 — 10.25am
Just before the market open on
Monday the Australian Securities and Investments Commission issued an
extraordinary rule, telling institutions they must reduce executed trades by a
quarter.
"In addition to increasing
volumes, Australia’s equity markets have seen exponential increases in the
number of trades executed, with a particularly large increase in trades last
Friday, 13 March,'' ASIC said in a statement released on Tuesday.
While markets have been able to
operate, "there was a significant backlog of work" for exchanges and
trading participants. The massive increase in trading is largely due to high
frequency trading, which saw 6 million trades across the ASX and Chi-X on
Friday compared to an average of 1.5 million trades.
"If the number of trades
executed continues to increase, it will put strain on the processing and risk
management capabilities of market infrastructure and market participants."
-----
Morrison government’s response is pitifully inadequate
A
website has been created for musicians and others in the entertainment industry
to post how they are affected by the coronavirus, called I Lost My Gig Australia
(ilostmygig.net.au).
Here’s the tally up to Sunday night: number of events cancelled - 10,468; jobs
impacted - 84,000; lost income - $25 million.
On
Sunday night Senator Peter Whish-Wilson tweeted: “My wife’s small biz is
considering closing in line with isolation measures but their wage bill alone
for the next two weeks is around $40g, so with no revenue coming in they are
buggered.”
Someone
tweeted in reply: “Same... 12 employees. What do I do? We employee people on a
promise. They build their lives around pay cheques. We have NO revenue now for
3 months as EVERYTHING has been cancelled or postponed. Horrible time... how do
I support my employees?”
-----
16 March, 2020
Economic impact ‘beyond’ GFC
Scott Morrison has warned the economic damage
from the coronavirus will be “well beyond” that of the global financial crisis,
as markets tumbled further on Monday morning despite the Federal Reserve slashing rates to
zero and pledging to pump hundreds of billions of dollars into the economy.
The Prime Minister told 3AW this morning
repeated the health crisis “is going to have very significant economic
impacts”.
He then went further, suggesting the hit to
the economy could eclipse that dealt during the 2008-09 crisis.
“This is nothing like the GFC. This has gone
well beyond that now. I mean, in the GFC, we didn’t have to shut down the
borders. In the GFC, we didn’t have to stop mass gathering of the public. I mean,
this is of an order well beyond what we saw last time. And it’ll be a
challenging period. But, you know, Australians will come through,” Mr Morrison
said.
-----
How coronavirus became a corporate credit run
Today,
it is not Wall Street financial institutions, but companies in a variety of
industries that are stressed, as a simultaneous supply and demand shock means
they need to tap credit lines to pay their bills.
Mar
16, 2020 – 10.27am
It was only hours after US
president Donald Trump told us, in an address from the Oval Office last week,
“this is not a financial crisis”, when markets began acting very much as though
it was.
Investors dumped assets resulting in the worst trading day since 1987. Bond markets seized up, putting
pressure on banks, and the US Federal Reserve swooped in with yet more
emergency funding for short-term borrowing markets (known as repurchasing or
repo markets), a tactic which suggests we may see quantitative easing to
infinity — and beyond.
It followed up on Monday (AEDT)
with another emergency interest rate
cut
and further liquidity operations.
So when exactly does a coronavirus-triggered
corporate market meltdown officially turn into a full-blown financial crisis?
That’s a question many market participants, and banks in particular, must be
asking themselves.
-----
Dire Chinese economic data reveals devastating coronavirus hit
Don Weinland and Xinning Liu
Mar
16, 2020 – 4.44pm
Beijing | China’s industrial output fell
to its lowest level on record in the first two months of this year and urban
unemployment hit its highest rate ever in February, as the coronavirus brought
the world’s second-largest economy to
a standstill.
Industrial output tumbled by 13.5
per cent in the first two months of this year and the urban unemployment rate
surged to 6.2 per cent in February, the National Bureau of Statistics said on
Monday.
The latest economic data also
showed that China retail sales plummeted by 20.5 per cent year-on-year in
January and February, and fixed asset investment fell by 24.5 per cent, down
from 5.4 per cent growth when the data were last reported.
The numbers came in far below
analysts’ expectations, with many China experts expressing surprise that
government officials were willing to report such devastating figures.
-----
Most world airlines 'bankrupt by the end of May'
Mar
17, 2020 – 4.08am
London | The coronavirus pandemic will
bankrupt most of the world's airlines by the end of May, the Centre for
Aviation has warned, urging coordinated government and industry action to avert
"a catastrophe".
"Many airlines have probably
already been driven into technical bankruptcy, or are at least substantially in
breach of debt covenants", the centre, known by its acronym CAPA, said in
a statement on Monday.
"Cash reserves are running
down quickly as fleets are grounded, and what flights there are operate much less than half
full."
-----
The toilet paper hoarders turned out to be right
As
grocery shortages extend to pasta, rolled oats and cough mixture, what can be
done to end the supermarket aisle crisis?
Mar
16, 2020 – 6.12pm
They have been derided as
irrational, selfish or just plain nutty. Turns out, the hoarders are getting
the last laugh.
As recently as a week ago,
political and business leaders assured Australians there was no need for panic
buying.
The toilet-paper factories were
working around the clock to keep the nation sanitary, we were told. Keep calm
and carry on wiping.
On Monday, the toilet paper shortage had spread to tissues and was threatening paper towels. In
economics, they call it the substitution effect.
-----
Trump orders tough new rules, stops short of full shut down
Mar
17, 2020 – 7.43am
Washington | Warning the coronavirus
disruption could last until August and acknowledging the growing recession
risk, President Donald Trump issued a series of hard-line recommendations that
Americans severely curb their movement for the next 15 days.
While he stopped short of a
complete France- or Italy-style shutdown, Mr Trump signalled that the
administration's "tough stance" may just be a beginning.
In a White House briefing that
sent Wall Street to worse ever points
decline
- and largest percentage falls since 1987, with key indexes shedding more than
12 per cent - officials said their latest recommendations aren't "an
overreaction".
"This afternoon we're
announcing new guidelines for every American to follow over the next 15
days," Mr Trump said.
-----
Australia is headed for a shutdown, it's just a question of how fast
Every
time new restrictions are imposed to preserve public health, it snuffs out the
livelihoods of thousands.
Mar 16,
2020 – 6.18pm
Inexorably, Australia is headed
for shutdown.
Every time you think the situation
has levelled out for a while at least, it changes, rapidly.
On Sunday morning, Chief Medical
Officer Brendan Murphy said it was still OK to shake hands. Not so by dinner
time.
On Friday, Treasurer Josh
Frydenberg was playing down as most unlikely the need for more economic
stimulus before the May 12 budget.
By Monday, the Treasurer, Mathias
Cormann and Prime Minister Scott Morrison were finalising plans to roll out
billions more by the end of this week, so any legislation, along with the legislation for the $17.6
billion
trundled out last week, can be passed when a severely truncated Parliament sits
next week.
-----
Get ready, a bigger disruption is coming
Pankaj Mishra
Mar
17, 2020 – 6.47am
As global supply chains break, airlines slash flights, borders rise within
nation-states, stock exchanges convulse with fear, and recession looms over
economies, from China to Germany, Australia to the United States, we can no
longer doubt that we are living through extraordinary times.
What remains in question, however,
is our ability to comprehend them while using a vocabulary derived from decades
when globalisation seemed a fact of nature, like air and wind. For the
coronavirus signals a radical transformation, of the kind that occurs once in a
century, shattering previous assumptions.
In fact, the last such churning
occurred almost exactly a century ago, and it altered the world so dramatically
that a revolution in the arts, sciences and philosophy, not to mention the
discipline of economics, was needed even to make sense of it.
The opening years of the 20th
century, too, were defined by a free global market for goods, capital and
labour. This was when, as John Maynard Keynes famously reminisced, "the
inhabitant of London could order by telephone, sipping his morning tea in bed, the
various products of the whole earth".
-----
Australia prepares for 50,000 to 150,000 coronavirus deaths
By Dana McCauley, Eryk Bagshaw and Rob Harris
March 16, 2020 — 7.44pm
Up to 150,000 Australians could
die from the coronavirus under a worst case scenario, the Morrison government
says, as it considers advice on restricting visits to pubs, cinemas and aged
care homes.
Deputy Chief Medical Officer Paul
Kelly said that the number of infections would range between 20 per cent to 60
per cent of the population. He urged the public to comply with social
distancing measures such as avoiding large gatherings of 500 or more people.
"This is an infectious
disease," Professor Kelly said in Canberra. "The more we can do to
separate people and stop the disease spreading, the better. The death rate is
around 1 per cent. You can do the maths."
-----
Dutch embrace 'herd immunity' as dire death warning prompts UK to change course
By Bevan Shields
March 17, 2020 — 11.13am
London: The Netherlands will embrace a
"herd immunity" strategy to combat the coronavirus pandemic, just as
Britain backs away from its own plans to manage rather than suppress the
disease following warnings of 250,000 deaths.
In remarks that make him the first
world leader to publicly back the herd immunity theory, Dutch Prime Minister
Mark Rutte said a mass lockdown was not feasible and the country had instead
opted for a plan that included "controlled distribution" of COVID-19
"among groups that are least at risk".
Herd immunity is a scenario in
which so many people become resistant to a certain disease it becomes much
harder for it to spread to the rest of the population.
However mass immunity is typically
achieved through vaccinations rather than via exposure and recovery. Experts
have warned that allowing coronavirus to sweep through younger and healthier
members of the public is a dangerous way of building resistance in the
community.
-----
Far from bouncing back, China's economy may be shrinking
Peter Hartcher
Political and international editor for The Sydney Morning Herald
March 17, 2020 — 12.00am
The world watched somewhat smugly
as China descended into grim shutdown to defeat the virus. Now the world is
watching anxiously as it recovers.
China was the main locomotive of
growth in the world economy over the past decade. As the globe heads into
recession, governments worldwide hope that the Middle Kingdom Express will soon
return to normal and pull the world out of it.
But will it? And, if so, when?
Forget the official rhetoric from Beijing. No experienced China watcher takes
that seriously. So a widely followed American Sinologist, Bill Bishop, author
of the Sinocism
newsletter, has set a threefold test. Beijing will actually believe that it has
overcome the virus and is returning to normal when these three things happen,
according to Bishop: One, President Xi Jinping visits virus central, the city
of Wuhan. Two, the schools reopen. Three, the government announces the dates
for the annual "twin sessions" of China's political elites, the
National People's Congress and the Chinese People's Political Consultative
Committee.
The first test was met last week.
Xi visited Wuhan. He didn't exactly go on a street walk to greet his grateful
people. Official media said that he greeted patients and health workers. But TV
footage showed otherwise. Xi stood in a big, bare room at a command centre
waving to patients over a video link. Even then he was wearing a 3M N95 face
mask, an upgrade on the basic surgical mask he's worn in Beijing recently. Test
two? There are signs that some parts of China are preparing to reopen schools,
but this is not yet a clear "yes". And there's no sign of dates for
the twin sessions.
-----
School closures ‘unlikely to slow coronavirus spread’
There
is limited evidence to show school closures are likely to be effective in
slowing the spread of COVID-19.
One
variable that makes it difficult to assess the impact of school closures on
reducing transmission of the virus is that little is understood about
children’s role in spreading coronavirus.
As
Victoria’s Chief Health Officer Brett Sutton said on Monday: “There is
currently limited information on the contribution of children to transmission
of COVID-19.
“The World Health Organisation-China Joint
Mission noted the primary role of household transmission and observed that
children tended to be infected from adults.”
A
researcher in Australia who contributed to one of the most thorough
mathematical modelling papers assessing responses to an outbreak of viral
respiratory disease, associate professor James Wood from the School of Public
Health and Community Medicine at the University of NSW, said the effect of
school closures was likely to be “modest”. “You have to remember that closing
schools means that children redistribute their contacts in the household and
community,” he said in a blog post.
-----
Coronavirus: Focus on herd immunity ‘a fatal mistake’
Relying
on herd immunity to protect the community from coronavirus would result in
widespread deaths among the elderly and a higher number of deaths in younger
people as well.
That’s
the view of medical experts who believe social distancing is the only
reasonable response to the rapid spread of COVID-19.
The
chief scientific adviser to the British government, Patrick Vallance, triggered
controversy when he appeared to indicate the UK was set to pursue an approach
that would allow millions of Britons to be infected, boosting eventual herd
immunity.
“Our aim is to try and reduce the peak (of the
infections), broaden the peak, not suppress it completely,” Sir Patrick told the
BBC on Friday. “Also, because the vast majority of people get a mild illness,
to build up some kind of herd immunity so more people are immune to this
disease and we reduce the transmission.”
-----
Harsh lessons from offshore haven't been learnt
Several
readers of this column have condemned me for criticising a government trying
its best in a difficult time. Guilty as charged.
Mar
17, 2020 – 3.52pm
Friends arrived home this week
from a holiday in Bangkok – after the government’s mandatory self-quarantining
rule came into effect.
Their time in Thailand meant they
were well used to regular temperature checks, including at the airport,
questioning about any symptoms, and abundant supplies of hand sanitisers in public
places. Until that is, they got back to Sydney Airport.
No temperature testing, no
questioning about symptoms or travel history, no soap left in the airport
bathrooms and no advice beyond two small pro-forma guides informing them they
could all go home (somehow) and still mix with family members there.
-----
Strict bans on travel, groups; PM warns crisis will last six months
Mar
18, 2020 – 11.25am
Australians are banned from
travelling overseas, indoor gatherings of more than 100 people are forbidden,
access to aged-care facilities is being severely restricted and even Anzac Day
ceremonies are being called off, as the government ramps up the fight against coronavirus.
A sombre Prime Minister Scott
Morrison and Chief Medical Officer Brendan Murphy warned more restrictions were
to come but cautioned that society and the economy as a whole would not be shut
down overnight.
"There is no two-week answer
to what we're confronting. There is no short-term, quick fix to how this is
dealt with in Australia,'' Mr Morrison said.
-----
How to stop the global recession becoming a depression
In
war, governments spend freely. Now, too, they must mobilise their resources to
prevent a disaster. Think big. Act now. Together.
Martin Wolf
Updated
Mar 18, 2020 – 10.34am, first published at 10.32am
The pandemic
was not unexpected. But reality always differs from expectations. This is not
just a threat to health. It may also be a bigger economic threat than the
financial crisis of 2008-09.
Dealing with it will require
strong and intelligent leadership. Central banks have made a good start. The
onus now falls on governments. No event better demonstrates why a quality
administrative state, led by people able to differentiate experts from
charlatans, is so vital to the public.
A central question is how deep and
long the health emergency will be. One hope is that locking down countries (as
in Spain) or parts of countries (as in China) will eliminate the virus. Yet,
even if this proved to be true in some places, it will clearly not be true
everywhere.
An opposite extreme is that up to
80 per cent of the world’s population could be infected. At a possible
mortality rate of 1 per cent, that could mean 60 million additional deaths,
equivalent to the second world war. This calamity would probably also take
time: the Spanish flu of 1918 came in three waves, over a year. Yet it is more
likely that this ends up in the middle: the death rate will be lower, but the
disease will also not disappear.
-----
Shutdown sparks solvency fears for investors
The
government's's latest economic shutdowns mean solvency is suddenly a real
concern in the growing number of sectors where cash is drying up.
Mar
18, 2020 – 11.26am
The latest stage of the lockdown
of the Australian economy should send a brutal message for Australian
investors.
Your models for estimating a
company’s value have been smashed up. Solvency is suddenly a real concern in
the growing number of sectors where cash is drying up.
Even before Prime Minister Scott
Morrison stood up on Wednesday to announce
fresh bans on gatherings,
the dominoes were falling on the ASX.
Companies worth more than $35
billion announced they had withdrawn their profit guidance for financial year
2020 as the coronavirus pandemic spares few sectors of the
economy.
-----
What the government and RBA can do to save the economy
It's
time for all hands to the economic pump as the coronavirus causes the single
largest globally synchronised drop in demand-side activity since WWII.
Mar
17, 2020 – 4.43pm
We are in the eye of the worst
financial storm in modern market history, which has vaporised the liquidity of
all asset-classes, including government bonds, equities and credit.
The good news is that Coolabah
Capital's data scientists' analysis suggests we might pass through it over the
next month.
One key turning point will be when
the infection and mortality rates recorded in the world’s largest economy, the
US, materially decelerate. Examining our live data feeds from South Korea and
China (excluding Hubei), the peak infection and death rates have occurred
within two to three weeks of them noticeably ramping up on a daily basis.
This time horizon assumes the US
can effectively contain and mitigate the virus as
well as the South Koreans have done.
-----
Josh Frydenberg faces the fight of his life
The
Treasurer has conscripted top officials of the RBA, big banks and power
companies to work out plans to shield hundreds of thousands of businesses from
bankruptcy.
Mar
18, 2020 – 12.01am
Treasurer Josh Frydenberg has been
holding emergency discussions with senior officials from the Reserve Bank and
Treasury, and top officials from the country's big banks in a bold effort to
stave off bankruptcy for hundreds of thousands of businesses that are seeing
their cash flows dry up as a result of the coronavirus shutdown.
People close to the talks say
Frydenberg is working hard to come up with a workable scheme that will ensure
that businesses and workers continue to receive income to tide them through an
extended period of economic shutdown.
Economists estimate that economic
activity could plunge about 10 per cent, as happened in China when Beijing's efforts to contain
the spread of the coronavirus brought the country to a standstill. Official figures
released this week show that Chinese industrial production fell 13.5 per cent
in the first two months of the year, compared with the same period in 2019, and
retail sales plunged 20.5 per cent.
-----
Construction 'on brink of collapse', says John Holland CEO
Mar
18, 2020 – 12.00am
John Holland chief executive Joe
Barr says the construction industry is on the brink of collapse and is not
sustainable after the builder of Melbourne's West Gate Tunnel and the Sydney
Metro reported a $59.6 million annual loss.
“I won’t sugar coat it," Mr
Barr told The
Australian Financial Review. "Tier one contractors in
Australia are not making any money, and governments across Australia keep
having successive project cost blowouts."
“We are in the midst of
Australia’s biggest infrastructure boom, but as an industry, we are teetering
on the brink of collapse."
John Holland, which is owned by
China Communications Construction Company and operates in New Zealand and
south-east Asia as well as Australia, delivered the after-tax net loss for the
12 months to December after reporting profit of $84.2 million a year earlier.
-----
World will suffer a recession: S&P
By Shane Wright
March 18, 2020 — 11.29am
The world will suffer a global
economic recession because of the coronavirus pandemic, ratings' agency S&P
Global has warned with Australia's unemployment likely to push to the highest
level since 1998.
The agency said new data out of
China, which showed industrial production there collapsing by 12.3 per cent
through January and February, pointed to the economic impact that would flow to
other countries as they responded to the coronavirus.
It believes the global economy
will grow by between one and 1.5 per cent this year, below global population
growth. America was facing a year of either zero growth or a fall of 0.5 per
cent while China's economy would likely only grow by 3.2 per cent.
S&P chief economist Paul
Gruenwald said it was clear that as countries were forced to close down their
economies to deal with the virus, the financial impact would be severe.
-----
The projection that changed UK virus plan
·
Reuters
British
Prime Minister Boris Johnson unveiled much more stringent measures to tackle
the coronavirus outbreak after research indicated a quarter of a million people
would have died under previous plans to control the pandemic.
The
modelling study, by Imperial College, and led by Professor Neil Ferguson, an
expert on the spread of infectious diseases, was published on March 16.
It
helped change the British government's position, according to those involved
with the decision. The government said it had accelerated its plans on
"the advice of the experts".
Below
are some of the findings of the research:
*
If no action had been taken against the virus it would have caused 510,000
deaths in Britain and 2.2 million in the United States, the study said.
"The
epidemic is predicted to be broader in the US than in the UK and to peak
slightly later. This is due to the larger geographic scale of the US, resulting
in more distinct localised epidemics across states," the study said.
-----
Medicos petition government for radical coronavirus lockdowns
Thousands
of doctors are begging the federal government to impose radical lockdowns that
confine people to their homes, amid warnings that Australia is heading for an
Italian-style disaster that would cripple our health systems.
More
than 2500 doctors have signed a letter urging that all places where people
gather be closed, including schools, pubs, restaurants, churches and cinemas. A
separate letter signed by almost 4000 more people, most of them medics, warns
that unless strict social distancing was implemented, Australia would be “in a
worse position than Italy is in”.
In
the first letter, written by Perth GP Hemant Garg, doctors urge a near total
lockdown of society. “We immediately recommend a three- to four-week closure of
schools, cultural and religious places (including places of worship), gyms and
leisure centres, pubs, bars, theatres, cinemas and concert halls,” the letter
said.
-----
Forget stimulus, it's solvency and survival now
The
top end of town and the suburbs are at different points of the same basic
problem - actually surviving this temporary shock to see the promised recovery.
Mar
19, 2020 – 12.00am
How do you get a haircut in a
world of social isolation?
This was one of the many questions
I had as I wandered past the barber on the main shopping strip of my eastern
Melbourne suburb with the government’s latest economic shutdown measures front
of mind, and Prime Minister Scott Morrison’s warning of a six-month war against
COVID-19
ringing in my ears.
Having spent Wednesday morning
watching a barrage of ASX-listed companies
reveal the hit they’ve taken from the pandemic – withdrawing profit guidance,
dumping deals and restructuring operations – I was fascinated to see how life
was progressing in the suburbs.
While people are getting on with
things, it was a worrying picture. The top end of town and the suburbs have the
same basic problem: solvency.
-----
PM's welfare wage to rescue the jobless
Mar
19, 2020 – 12.01am
Hundreds of thousands of workers
who face losing their jobs due to the coronavirus crisis will be given fast
access to a new, temporary wage that will be set at a higher rate than the
dole.
The new transitional income
support will be a central feature of a forthcoming package that will be more
about survival than stimulus, and which, sources say, will dwarf last week's $17.6 billion package of economic measures aimed at
stimulating supply and demand.
Similar survival assistance for
small and medium businesses will be the other focus of the new package. As The
Australian Financial Review reported on Tuesday, The government has been in
discussions with the banks about debt relief measures ranging from underwritng
loans and repayment holidays in return for cash payments.
The government is rushing to
finalise the measures so they can be legislated alongside the $17.6 billion
stimulus package when a scaled-back Parliament sits briefly next week.
-----
Stick to paracetamol, coronavirus patients recovering at home told
By Melissa Cunningham and Liam Mannix
March 18, 2020 — 4.43pm
If you're looking for relief from
coronavirus symptoms, take paracetamol rather than ibuprofen, and avoid
non-evidence-based treatments being promoted on social media, health experts
recommend.
Australian doctors typically treat
patients with a fever – one of the key symptoms of COVID-19 – with the
painkiller paracetamol, often sold as Panadol.
Paracetamol provides quick relief
from symptoms and is relatively safe.
In other countries, doctors
regularly use the anti-inflammatory ibuprofen, often sold here as Nurofen,
instead.
-----
Restaurants, pubs, venues face 'devastating' six months
By Eryk Bagshaw and Nick Bonyhady
March 18, 2020 — 8.00pm
Australia's restaurants, pubs,
cinemas and theatres face six months of ruin as the coronavirus forces the
government to ban indoor gatherings of more than 100 people and the national
cabinet considers further measures to stop people socialising.
In an escalation of the
containment strategy that distinguishes Australia from the rest of the world,
Prime Minister Scott Morrison said the longer-term restriction of entertainment
activities would allow schools and supermarkets to keep functioning and avoid
the total lockdown of society sweeping through Europe.
"There is no short-term quick
fix to how this is dealt with in Australia," said Mr Morrison. "The
idea that you can just turn everything off for two weeks and then just turn it
all back on again and it all goes away, that is not the evidence."
-----
Britain shuts down all schools amid coronavirus pandemic
By Bevan Shields
March 19, 2020 — 4.48am
London: Prime Minister Boris Johnson has
ordered the closure of all schools in Britain in a fresh response to the
coronavirus pandemic that could put Australia under more pressure to follow.
The United Kingdom and Australia
had for several weeks shared the view that keeping schools open was the best
option, citing expert modelling that concluded shutting them would do little to
stop the spread of COVID-19 and risked taking parents away from frontline
emergency services jobs.
However Downing Street altered
course on Wednesday (Thursday AEDT) and announced all public schools, private
schools and childcare centres would close indefinitely from Friday afternoon.
Prime Minister Boris Johnson said
the 'curve' of infection growth was still too sharp and keeping millions of
children at home would help lower the pressure on the National Health Service.
-----
'It's not magical': Pandemic modeller demystifies Australia's coronavirus strategy
By Kate Aubusson
March 19, 2020 — 8.39am
A pandemic modeller advising the
Australian government has declined to tell the public how many Australians they
expect to die or become critically unwell in the course of the coronavirus
crisis.
But Professor Jodie McVernon,
director of epidemiology at the Doherty Institute, has shed light on the
behind-the-scenes work, including the reason the government is keeping schools open and why their worst-case scenario
has proven correct.
She is part of a team of pandemic
modellers, infectious disease and public health experts advising the government
every day on its coronavirus response for the past eight weeks.
"We are not coming to these
questions naively or without prior thought. [We are] coming with tools we've
prepared earlier," she said.
-----
Aussie billionaire investor warns of 'devastating economic collapse'
By Charlotte Grieve
March 19, 2020 — 9.10am
The chairman of $100 billion
investment house Magellan Financial Group, Hamish Douglass, has warned of a
near total shutdown of the world economy over the next two to six months,
calling on governments to increase stimulus packages while taking emergency
measures to avoid a depression.
In a note to clients, Mr Douglass
said the impact of the deadly coronavirus was a "fast-moving and
fluid" situation as Australia's dollar plummets below 60 cents and the ASX
continues to fall, having lost more than $665 billion in value so far over the
past four weeks.
Mr Douglass said the potential
financial and social consequences are "very concerning" and that for
many small businesses and those that have high financial leverage, the crisis
"could prove fatal". "Only governments can prevent these
businesses from failing," he said.
-----
Australia ‘on track to mirror Europe’ in coronavirus case explosion
10:45PM
March 18, 2020
Experts
are warning that Australia is on track to see an explosion of coronavirus cases
similar to that being experienced in Europe, with new research revealing the
vast majority of COVID-19 cases may be undetected in the community.
An
extra 57 COVID-19 cases were confirmed in NSW on Wednesday, bringing the total
in the state to 267, while Victoria recorded 27 new cases. Queensland’s case
count rose to 94. Western Australia now has 35 COVID-19 cases, South Australia
has 32, Tasmania has seven, the ACT three and the NT has one.
Research
published on Wednesday in the academic journal Science estimated that as many
as 86 per cent of all COVID-19 infections in China prior to lockdowns
instituted in late January were not documented.
Undocumented
infections are those that are asymptomatic or of such mild symptoms that the infected
person does not seek medical care or obtain a diagnosis.
-----
Scott Morrison bans non-citizens from entering Australia
19
March
2020
Border controls hardened
All
foreign nationals will now be banned from entering Australia due to the
coronavirus pandemic.
Scott
Morrison has hardened the closure of the nation’s borders, after earlier this
week forcing all new entrants into Australia to self-isolate for 14 days.
All
Australian citizens, residents and direct family members will still be able to
enter the country, but will have to self-isolate.
-----
A $105b bridge across the chasm
Mar
19, 2020 – 7.08pm
The Reserve Bank and Morrison
government have committed $105 billion to build a financial bridge over a
growing chasm in the Australian economy, cutting interest rates to record lows,
offering cheap loans to banks and small businesses and embarking on the first
major quantitative easing program the country has seen.
After cutting the official cash
rate by 0.25 percentage points to 0.25 per cent Reserve Bank governor Philip
Lowe said circumstances were so "extraordinary" that the cash rate
was likely to remain at the record low for another three years.
The central bank announced a bond
buying program as well as a fresh $90 billion line of credit to
banks
with incentives to pass on cheap rates to small and medium sized businesses.
The government has provided $15 billion to small banks and non-bank
institutions to
help with their funding.
"To help us get to the other
side we need a bridge," Dr Lowe said on Thursday. "Without that
bridge, there will be more damage, some of which will be permanent, to the
economy and to people's lives. We are expecting significant job losses."
-----
Australia's 'whatever it takes' moment
Mar
19, 2020 – 6.48pm
Reserve Bank governor Philip Lowe,
the Morrison government and banks are "pulling together" for an unprecedented
crisis facing the Australian economy, making extraordinary interventions to
stop the financial system freezing, and to fight a devastating recession.
The RBA chief and Prime Minister
Scott Morrison pledge to build a
"bridge"
to an eventual economic recovery, but they know the next six months will be
painful.
Hundreds of thousands of people
will lose their jobs and small-business income due to the coronavirus locking
down large sections of the economy. Tellingly, Lowe admits the job losses will
be "significant" and the situation is "very serious".
The boldest policy move so far is
the RBA creating $90 billion out of thin
air
to lend to commercial banks at an ultra-low interest rate of 0.25 per cent for
three years, for banks to on-lend to small businesses and companies facing the
coronavirus crisis.
-----
'I'm an ER doctor. The coronavirus is already overwhelming us'
Emergency
healthcare workers are used to reacting in a crisis, working long hours and
making life and death decisions - that's their job. But the coronavirus crisis
is a different kind of test.
Michelle Romeo
Mar
19, 2020 – 11.01pm
I'm on my eighth hour Saturday
working in suffocating protective gear - mask, face shield, gown and gloves -
when an elderly patient is wheeled into room 23 of my hospital's emergency
department. He's confused and gasping for air as his family tells me over the
phone that he doesn't want any "heroic measures" performed: no
aggressive resuscitation, no breathing tube. Under normal circumstances, there
are a few tricks I might try before I have to put a breathing tube down
someone's airway and connect them to a ventilator, which breathes for them.
But now those less-invasive
breathing interventions could wind up spraying contagious viral particles into
the air, putting my other patients at risk of contacting this patient's
presumed illness, COVID-19. So I place a simple breathing
mask over his frail face while I watch his oxygen levels fall below a viable
level. At that point, I lock eyes with the supervising ER doctor standing
nearby, and he dismally mutters: "This is only the beginning."
He's right, and that's my worry.
This patient is the first of many who are about to come to us, suffering.
-----
How to flatten the coming bankruptcy curve
Without
deep co-operation between government, business and stakeholders we are heading
for a death spiral of company failures.
Mark Korda
Mar
20, 2020 – 12.00am
The federal government and the
business community urgently need to flatten the bankruptcy curve to prevent catastrophic
damage to Australia’s businesses.
Ultimately, it is people’s jobs
and livelihoods at risk.
A tidal wave of business failures
threatens to do more damage to more people than the health impact of the coronavirus.
Thousands of businesses have been
hit with an overnight disappearance of revenue with no reduction in fixed
costs. Nothing like this has happened
before.
The Commonwealth has announced
important measures for small business and more is likely to be on the way. But the
big numbers are in the medium and large businesses.
-----
Government relents on Newstart, concedes recession likely
Mar
19, 2020 – 3.10pm
The government has dropped its
longstanding opposition to increasing the Newstart allowance, at least
temporarily, and has shut the nation's borders to foreigners for at least six
months, as it continues to grapple with the escalating coronavirus crisis.
Treasurer Josh Frydenberg also conceded
for the first time that a recession was now "very hard to avoid''.
After The Australian Financial Review
revealed the impending economic assistance package would contain an income
payment higher than the current rate of the dole for those who lose their jobs,
Scott Morrison indicated on Thursday the increase would be extended to existing
Newstart recipients.
The extension would be granted for
at least for six months, which is the forecast duration of the virus crisis.
-----
'Hell is coming': Billionaire Bill Ackman sent sharemarket spiralling
Theron Mohamed
Mar
20, 2020 – 7.18am
Key Points
- Bill Ackman warned on Wednesday of mass casualties, industries collapsing, and a deep recession if the US government doesn’t impose a nationwide shutdown to slow the spread of coronavirus.
- The billionaire hedge fund manager’s emotional, nearly half-hour CNBC interview pushed an already-vulnerable sharemarket near intraday lows.
- Ackman also revealed that he was buying shares, sparking accusations that he was manipulating the market to drive stock prices down or profit from short bets.
- A list of the Pershing Square Capital chief’s most striking comments is below.
Billionaire hedge fund manager Bill Ackman warned on
Wednesday
that millions of Americans would die, industries would collapse, and the US
economy would tumble into a deep recession unless there’s a 30-day nationwide
shutdown to slow the spread of coronavirus.
The Pershing Square Capital chief’s dire warnings, laid out during an emotional,
half-hour CNBC interview,
pushed a vulnerable stock market to intraday lows.
-----
Record increase in Australian coronavirus cases
Mar
19, 2020 – 6.49pm
Australia's confirmed cases of the
deadly coronavirus increased by a record amount on Thursday – to more than 700
– as senior government health advisers remained optimistic that behavioural
changes would stop the trajectory seen in the US and the UK.
Deputy Commonwealth chief medical
officer Paul Kelly acknowledged Australia was currently following trend lines
seen in other countries battling to contain COVID-19, but described the
mandatory 14-days quarantine for thousands of travellers and low community
transmission as the way to slow the spread.
"It is not surprising at the
moment, given that almost all of our cases still have come from overseas, that
we're following a similar curve to those overseas countries," Professor
Kelly said.
-----
RBA has fired its shots. Now time for government's overwhelming force
By Shane Wright
March 19, 2020 — 8.06pm
The Reserve Bank fired has fired
its biggest cannon shot in the war to keep the Australian economy afloat.
It's now for the Morrison
government to provide the cavalry, ground troops, baggage train and a couple of
kitchen sinks.
Reserve Bank Governor Phil Lowe
addressed the media on Thursday warning of financial fallout of the coronavirus
pandemic.
Make no doubt about it, the RBA is
in a situation it never thought it would find itself or wanted to be in.
-----
UTS freezes spending and flags up to $100 million losses
By Natassia Chrysanthos
March 19, 2020 — 4.33pm
The University of Technology
Sydney has deferred capital works and frozen recruitment to preserve cash amid
the coronavirus pandemic, while it increases investment in measures that can
bring teaching in line with social distancing.
Vice-Chancellor Attila Brungs
wrote to staff on Thursday, announcing the university would "take some
more extensive actions" to safeguard itself against up to $100 million
losses brought about by the pandemic.
These also include a freeze on all
non-critical travel, consulting and discretionary spending.
-----
RBA throws $100 billion Hail Mary to save the Australian economy
By Shane Wright, Eryk Bagshaw and Rob Harris
March 19, 2020 — 9.03pm
One hundred billion dollars will
be thrown at the economy and interest rates held at record lows for years in a
last-ditch effort to keep businesses alive as the government prepares to boost
payments to workers sacked because of the coronavirus pandemic.
As Treasurer Josh Frydenberg
admitted it would be hard for Australia to avoid its first recession in 29
years, the RBA cut official interest
rates to 0.25 per cent, revealed plans to buy government debt to keep borrowing
rates low and said it would lend at least $90 billion to banks on the proviso they passed on
that cash to small and medium sized businesses.
The federal government is pumping
$15 billion into small lenders, also aimed at the business sector, as it puts
the finishing touches to its own massive support package that will also contain
direct assistance to those pushed out of work.
-----
'Not even worth opening your doors': Shopping malls turn into ghost towns as coronavirus hits retail
By Simon Johanson and Carolyn Cummins
March 20, 2020 — 10.30am
"It's diabolical," says
clothing retailer Joe Bertuna as he looks out on the empty halls of Australia’s
largest shopping centre in Chadstone. "It's not even worth opening your
doors."
"We can't last much
longer," says another trader selling fried chicken in what is normally a
bustling food court at another of Melbourne's large malls - Northland. "I
haven't paid my rent this month. I've been here for 21 years now, and not ever
once have I missed the rent," he told The Age and The Sydney Morning Herald.
The mall, usually bustling with
people, is like a ghost town with solitary shoppers wandering past empty
stores. The eerie quiet is echoed in Sydney's northern beaches in the usually
crammed Westfield Warringah Mall.
There, one ladies' fashion chain
staffer says she has not "seen anyone for hours". At a nearby beauty
salon, liked by landlords as an 'internet-proof' tenant, a beautician says
"I've never seen it like this".
-----
Buckle up for hell of a bumpy ride
It’s
the response to COVID-19 that’s generating an almost certain recession, rather
than the virus itself.
March
19, 2020
“Recessions kill people, too,” says Bob Gregory,
who has seen his share of economic downturns, and knows the social havoc they
can wreak.
The
80-year-old emeritus professor of economics at the Australian National
University — and former Reserve Bank of Australia board member — says while
recessions invariably lead to collapses in income and employment, that in turn
fuels suicide, alcoholism and social breakdown.
“The
big deficits will crimp future investment in hospitals and that kind of public
infrastructure that saves lives,” he says.
The
octogenarian, currently holed up in his Canberra home — “the university is
frightened I’ll die if I come in” — was on the RBA board for a decade to 1995,
during the economic turmoil of the 1991 recession that threw an extra 500,000
people onto the dole queue within 12 months.
-----
Federal budget delayed as PM upgrades indoor restrictions, flags further travel bans
By Eryk Bagshaw
Updated March 20, 2020 —
3.30pmfirst published at 2.29pm
Prime Minister Scott Morrison has
delayed the federal budget, ordered limits of one person per four square metres
in indoor venues and warned further domestic travel restrictions are coming.
Mr Morrison confirmed the national
cabinet had agreed to a cap of one person per four square
metres for indoor gatherings,
including in pubs, cafes and restaurants, as was recommended by Australia's
chief medical officers last week.
"If you've got a room, if
you've got a premises that's 100 square metres, then you can have 25 people in
that room," he said.
------
It's the Coronacession: We’re closing down the economy, under doctors’ orders
Ross Gittins
Economics Editor
March 21, 2020 — 12.08am
It’s now clear that we – like most
countries – are already in a recession that promises to be long and severe. It
will be a recession unlike any we’ve previously experienced. Why? Because it’s
happening under doctors’ orders. So it deserves a unique name: the
coronacession.
It’s taken a few weeks for this to
become obvious, mainly because economists don’t know much about epidemiology
and it’s taken the nation’s medical experts until now to make clear that their
preferred response to the virus will take months to work and involve closing
down much of the economy.
We already know that real gross
domestic product is likely to contract in the present March quarter and it’s
now clear that last week’s $17.6 billion stimulus package is unlikely to fully
counteract the fall in economic activity – production and consumption – during
the imminent June quarter, brought about by the government’s measures to impose
“social distancing” and encourage “self-isolation”.
Since the medical authorities are
only now suggesting that these efforts to slow the spread of the virus may need
to continue for six months – which, considering their bedside-manner efforts to
break it to us gently, may well prove an underestimate – it won’t be surprising
if the economy also contracts in September quarter.
-----
Budget delayed as economy changes too fast to forecast
By Shane Wright
March 20, 2020 — 7.45pm
The federal budget will be delayed
until October and the Parliament forced to pass a special appropriation bill
next week to ensure the federal government can continue to operate.
In what will be the first delay to
the passage of a federal budget outside an election since 1975, the budget that
was planned to be handed down on May 12 will be pushed back to October 6.
The government will also lift the debt ceiling from $600
billion to $850 billion
in a move it says will ensure "it has the capacity to deal with the ongoing
economic impact of the coronavirus".
-----
Hunger Games: more debt isn’t the answer with restaurants and cafes on the ropes
Australia’s
restaurants and cafes have gone from boom to bust, from smashed avocado to
smashed. If they are not helped immediately, their tragedy will be Australia’s.
It’s
true that the flip side of the sudden stop to eating out and discretionary
shopping is that butchers are selling out before lunch and supermarkets are
having their best days in history, but their good fortune will not be enough to
offset the disasters elsewhere.
On
Thursday the Reserve Bank produced its “whatever it takes” moment, to borrow
from former ECB president Mario Draghi’s 2012 statement about preserving the
euro, except the Aussie version was more laconic.
At
least the RBA statement said the money would be “at least” $90bn in 0.25 per
cent funding for banks to lend to small and medium-sized businesses, rather
than “up to”, as the government’s offer of $25,000 per business said a week
ago,
-----
PM unleashes another $66b, more to come
Mar
22, 2020 – 12.01am
Key Statistics
- $31.9b Cash flow boost for employers and charities of up to $100,000, up from $25,000.
- $20b Augmented Newstart payments for workers who lose their jobs
- $40b facility Government-guaranteed loans of up to $250,000 for 3 years for small businesses.
Cash payments for small and medium
business have been boosted to $100,000 each, and they will also have access to
cheap government guaranteed loans, as part of a $66 billion coronavirus rescue package to be announced on
Sunday.
While the $100,000 payments can be
used for wage subsidies, workers who have been laid off or stood down will be
given fast access to a new welfare wage to tide them over.
Sunday's bailout scheme, the second announced
in less than two weeks, will not be the last, as the government has signalled a
third package will most likely be needed.
-----
The coronavirus supply chain shock goes global
Brendan Murray
Mar
20, 2020 – 11.39pm
A "rolling natural
disaster."
That's how Ethan Harris, head of
global economic research at Bank of America, describes the industrial closures
sweeping from Germany to Peru, sparing neither the richest countries nor the
poorest, as businesses and consumers hunker down to ride out the COVID-19 pandemic.
Harris, the chief US economist of
Lehman Brothers from 2003 to 2008, reckons the shock to supply chains is deeper
and more sprawling than the trade wars of the past two years and likely to be
more prolonged than the storms, earthquakes or floods that have strained major
industries for spells in the past. He expects these factory shutdowns will last
into May and possibly longer.
Compounding the supply jolt to
companies is a demand plunge in Europe, the US and other major economies.
Millions of workers are losing their jobs and the consumers who remain employed
have to stay indoors.
Apple is confronting the impact on component makers in Italy,
Germany, Malaysia and South Korea after having weathered the February slowdown
in Chinese factories that do the final assembly of products like iPhones and
AirPods.
-----
Rollercoaster week for supermarket workers as industry wades into 'uncharted waters'
By Dominic Powell
March 21, 2020 — 12.00am
At 8.15pm on Thursday, the final
customer strolls out of a Coles supermarket in Melbourne's inner suburbs,
clutching some cereal and a bag of apples. For a brief moment, the only sounds
are the hum of the refrigerators, and a Britney Spears song playing quietly on
the in-store radio.
Suddenly, it's action stations. A
bevy of pallets stream from the back dock, loaded high with pasta, beans, meat,
fresh fruit, and an almost biblical procession of loo roll.
Shelves being wiped clean, fights
in the isles and sales through the roof. At supermarkets throughout Australia,
staff the best, and worst, of Australia.
Staff members quickly get to work
cutting open packages and filling the stores' bare shelves with precious goods.
It's the first shift for two employees, hired in the last week as supermarkets
scramble to deal with increased demand caused by panic buying amid growing fear
about the coronavirus pandemic.
-----
How to fight a COVID slump and protect recovery
In
just two months the world economy has been turned upside down. Stockmarkets
have collapsed by a third and in many countries factories, airports, offices,
schools and shops have been closed to try to contain the virus. Workers are
worried about their jobs and investors fear companies will default on their
debts.
All
this points to one of the sharpest economic contractions in modern times.
China’s GDP probably shrank by 10-20 per cent in January and February compared
with a year earlier. For as long as the virus rages, similar drops are likely
in America and Europe, which could trigger a further downward lurch in Asia.
Massive
government intervention is required to ensure that this shock does not spiral
into a depression. But scale alone is not good enough — new financial tools
need to be deployed, and fast.
Western
authorities have already promised huge sums. A crude estimate for America,
Germany, Britain, France and Italy, including spending pledges, tax cuts,
central-bank cash injections and loan guarantees, amounts to $US7.4 trillion
($12.7 trillion), or 23 per cent of their GDP. Yet central banks are responsible
for over four-fifths of that and many governments are doing too little. A huge
array of policies is on offer, from holidays on mortgage-payments to bailouts
of Paris cafes.
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Coronavirus: Even glass-half-full optimists can do the maths
“Do the maths.” Whether intentionally or
otherwise, in just three words, Deputy Chief Medical Officer Paul Kelly
highlighted the gravity of the coronavirus in a way no politician has been
willing to.
It’s
the projected death toll that is most staggering. Indeed, that reality, and
how profoundly it will impact on the Australian and global societies, is at the
heart of the panic that has engulfed the planet.
Make
no mistake: we are living through extraordinary times. And as one government MP
said to me during the week: “We aren’t even at the end of the beginning yet.”
Doing
the maths as to how many among us might fall victim to this virus is truly
mind-boggling. We are constantly being told to listen to the experts. Hear
what the medical professionals have to say. It is those same experts who say
that the virus could easily infect between five million and 15 million
Australians. Their assessment is that the genie is most likely already out of
the bottle, and hopes of containing the virus such that it doesn’t spread so
dramatically are wishful thinking.
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Coronavirus: National three-month lockdown ‘the best option’
The
head of think tank the Grattan Institute has called for a national lockdown of
up to 12 weeks to contain COVID-19, arguing it’s the best option to support
society and the economy.
While
acknowledging it wouldn’t “be pretty”, John Daley says it is a more plausible
response than the current strategies of “flattening the curve” of the epidemic
through social distancing, quarantine of those exposed, isolation of the
infected and tracking their contacts.
The
“end game” to stop then restart national life would build on the federal
government’s move to seal Australia’s borders by minimising activity and
interactions, Professor Daley said.
He
said only essential services such as the food supply chain, power and water
utilities and the internet would be kept going.
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Royal Commissions And The Like.
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No entries in this section
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National Budget Issues.
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Australia’s economy will collapse in Q2
The
Morrison government's plan to protect the economy and the health of Australians
needs to change. The sooner it does the better.
Mar
15, 2020 – 10.57am
Unprecedented decisions await in
Canberra this week.
Thus far the Morrison government
has presented the coronavirus outbreak in mutually inclusive terms.
According to the plan, we can protect the health of
Australians, whilst keeping Australians in jobs and Australian businesses in
business. Unfortunately, this is not the case.
The plan will need to change. The
sooner it does, the better.
There is a grim logic here, that
we are reluctant to unpack. But we know, from our vantage, that it will predominate in the
months ahead, both in financial markets and in public policy circles.
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Regulators ease coronavirus credit squeeze
Mar
16, 2020 – 9.54am
Financial regulators are extending
short-term liquidity funding to banks and are considering easing regulations on
lenders to help prevent a credit squeeze hitting cash-strapped small
businesses.
As part of its normal daily market
operations the Reserve Bank of Australia will lengthen liquidity it offers
commercial banks to "six months or longer" in response to global
credit market volatility triggered by the coronavirus crisis.
Banks have good long-term funding
but have soaked up $18.6 billion of the short-term liquidity in just three
trading days, up significantly on the $7.8 billion in the three days before.
The Council of Financial
Regulators signalled they may offer regulatory relief to banks to help them
continue to lend to customers and not suddenly foreclose on borrowers, such as
households and struggling small businesses whose cash flows will be crimped by
the coronavirus economic downturn.
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ASIC applies algo brakes to High Frequency Trading
Directs 25 percent trade execution cut amid COVID-19.
You could call it the share market
equivalent of Coles and Woolworths imposing purchasing limits to stop a run on
toilet paper because of COVID-19 anxiety.
With financial markets oscillating
wildly, Australia’s corporate watchdog on Monday moved to check violent swings
in high frequency trading on the local equities market from swamping crucial
infrastructure, imposing an immediate 25 percent cut in trades executed daily.
The reduction, which hits volumes
rather than value, is aimed at easing pressure on post-trade processing that is
starting to strain.
The Australian Securities and
Investments Commission (ASIC) on Monday morning said it had “issued
directions
under the ASIC Market Integrity Rules to a number of large equity market
participants, requiring those participants to limit the number of trades
executed each day until further notice.”
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Media Release Statement by Philip Lowe, Governor
Number 2020-07
Date 16 March 2020
As Australia's financial system
adjusts to the coronavirus (COVID-19), financial regulators and the Australian
Government are working closely together to help ensure that Australia's
financial markets continue to operate effectively and that credit is available
to households and businesses. Refer to earlier CFR press release. Australia's financial system is
resilient and it is well placed to deal with the effects of the coronavirus. At
the same time, trading liquidity has deteriorated in some markets.
In response, the Reserve Bank
stands ready to purchase Australian government bonds in the secondary market to
support the smooth functioning of that market, which is a key pricing benchmark
for the Australian financial system. The Bank will also be conducting one-month
and three-month repo operations in its daily market operations until further
notice to provide liquidity to Australian financial markets. In addition the
Bank will conduct longer term repo operations of six-months maturity or longer
at least weekly, as long as market conditions warrant. The Reserve Bank and the
AOFM are in close liaison in monitoring market conditions and supporting
continued functioning of the market.
The Bank will announce further
policy measures to support the Australian economy on Thursday.
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PM to fast-track second wave of stimulus
Mar
16, 2020 – 1.25pm
The federal government is working
on a second coronavirus stimulus package that could be
rolled out within days.
Less than a week after unveiling a
$17.6 billion package to try to save business and boost
consumption, the crisis has worsened to such an extent that a second round is
deemed to be urgent.
It is understood the new economic
measures will be more about support than stimulus and will target both business
and households.
The Australian Financial Review understands measures being
discussed include an extension of some of those announced last week plus some
new initiatives.
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Broken bond market forces RBA's hand
When
the bond market sends the wrong signals, central banks start to worry.
Mar
16, 2020 – 5.36pm
In the past three weeks we have
witnessed market dislocations of biblical proportions.
Regulators, for the most part, as
concerned as they are about plunging values, have been prepared to accept them
as a re-pricing of risk
But when there are blockages in
some of the largest, most liquid, and most important markets in the world, they
get really worried.
That is why the Reserve Bank stepped in at midday to announce it would buy
government bonds to support the orderly functioning of the market.
Think about that for a moment:
Australia's government bond market was broken. The bond market – the risk-free
rate that underpins borrowing costs across the economy – was sending the wrong
signal.
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Battered bond market sends disturbing signals
Mar
18, 2020 – 2.10pm
Investors are still dumping
Australian government bonds even as the Reserve Bank is widely expected to
announce plans as soon as tomorrow to conduct quantitative easing, which is
supposed to lower bond rates.
The unusual spike in bond yields,
given investors usually flock to bonds in times of stress, has been attributed
to an aggressive unwind in hedge fund trading positions but the spectre of trillions of dollars of fiscal spending, and the pending supply of
necessary issuance, is further unsettling the market.
“Sovereign issuers are trying to
borrow large amounts of money in a short period of time to have capacity to pay
for the fiscal stimulus, and this comes at a time of sharp volatility in all
assets including the risk free government bond curve," said Commonwealth
Bank's head of bond strategy, Martin Whetton.
“So the curve has moved quickly to
price in the supply.”
-----
Unemployment of 5.1pc in Feb no comfort now
Australia’s
jobless rate dropped to 5.1 per cent in February, from 5.3 per cent in the
month before, suggesting the labour market had at least been on a better than
expected trajectory heading into the teeth of the coronavirus crisis, which has
triggered partial shutdowns of the economy and warnings of mass lay-offs.
The
Australian Bureau of Statistics said there was “no notable impact” from
bushfires or the pandemic on its February labour force statistics, which are
focused on the first half of the month.
A
0.1 percentage point drop in the participation rate to 66 per cent helped drive
the drop in the unemployment measure, alongside a solid 26,700 extra jobs,
20,000 of which were part-time.
EY
chief economist Jo Masters said the data was “unlikely to provide any comfort
to policymakers”.
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Conventional capitalism is dying: Macquarie Wealth
Macquarie
Wealth Management, an arm of the beating heart of Australian capitalism,
Macquarie Group, has warned that “conventional capitalism is dying” and the
world is headed for “something that will be closer to a version of communism”.
In
a series of notes sent to investors on Wednesday, Macquarie analysts and
researchers said a number of policies announced overnight, including cash
payments to US residents, credit guarantees for businesses in Germany, and a
Swedish stimulus worth 6 per cent of the Nordic country’s economy to keep banks
lending to companies, were a sign that governments were shifting towards
“neo-Keynesian” and Modern Monetary Theory policies, including a universal
basic income guarantee.
The
European Central Bank also announced a €750 billion asset purchase program as
President Christine Lagarde said “extraordinary times require extraordinary
action” and that there would be “no limits” on the central bank’s commitment to
protecting the single-currency union.
Across
two notes, titled “A world of no historical parallels –- Making up rules &
policies as we go” and ‘Tear at the fabric: Glimpses of the future are here for
all to see”, Macquarie Wealth analysts said the shift towards a more
fundamental change in the way the economy functioned was evidenced by the way
central banks and governments “belatedly recognised” that copying the policy
responses of the global financial crises a decade ago were “not going to be
enough”.
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Health Issues.
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How to beat the health insurance premium hikes
By John Collett
March 18, 2020 — 12.15am
More than 13 million people with
private health insurance cover face an average premium hike of 3 per cent from
April 1. Some policy premiums will rise by more than double that amount.
However, there are a few simple
steps that you can take to help beat the price increases, or at least minimise
their impact.
For example, older people don't
need pregnancy cover and a couple who buys their cover as individuals can
sometimes pay less than buying cover as a couple.
There are
ways to beat the price hikes to health insurance that come into effect from
April 1.
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How far should genetic engineering go to allow this couple to have a healthy baby?
Federal
Parliament will soon decide whether a controversial IVF procedure called
mitochondrial donation should be legalised. But the treatment has been labelled
dangerous, and a slippery slope to “designer babies”.
March
20, 2020
One morning in 2005, Shelley
Beverley woke up to find that she had gone deaf. She was 21, and living in
Johannesburg with her older brother Neil. “I was very scared,” she says. “It
was just so sudden.” She struggled through the rest of the day, hoping that her
hearing would come back, but it didn’t. In one sense, her hearing loss wasn’t
entirely a surprise: Beverley’s grandmother had been deaf, Neil had lost his
hearing when he was 13, and her mum, Mary, had lost hers when she was 32. “We
knew it ran in the family,” she says, “but I thought I’d been lucky and not
inherited it.”
Beverley, 35, lives in Margate, a
semi-rural district south of Hobart, with her husband James. The couple
migrated to Australia from South Africa in 2010, looking for space, buying 2½
hectares of lush green grass at the foot of a forested ridge near the mouth of
the Derwent River. “We love the wildlife here,” says James, looking out the
living room window. “We’ve seen pademelons, echidnas, quolls, blue-tongue
lizards, even a Tassie devil.” At dusk, hundreds of kangaroos emerge from the
forest to gorge on the grass. “It’s very peaceful,” says James. “It’s really
helped us after everything that’s happened.”
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International Issues.
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We've seen this story before but this time the Fed is taking on a different beast
Stephen Bartholomeusz
Senior business columnist
March 16, 2020 — 11.55am
We’ve seen this story before. The
Federal Reserve Board has cut its policy rate to zero and embarked on a $US700
billion ($1.13 trillion) bond and mortgage-buying program in an attempt to
protect the US economy from the economic fallout of the coronavirus. But are
they fighting the last war?
In 2008, central banks created the
script, slashing interest rates to zero and, in some cases beyond. They
embarked on massive quantitative easing programs, hoovering up bonds and
mortgages to lower interest rates across their yield curves.
They did it to hold a teetering
global financial system together. They were responding to a financial crisis
sparked by the meltdown in sub-prime loans. It worked, to a degree.
The financial system didn’t
implode, there was a recession rather than a depression and, while most of
those unconventional settings have remained in place more than a decade later,
financial markets that were under-pinned by those low rates experienced a
massive 11-year bull run.
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Fed slashes interest rates to near zero, returns to QE
Updated
Mar 16, 2020 – 9.25am, first published at 8.11am
Washington | The US Federal Reserve slashed
its key interest rate by 100 basis points and launched a massive $US700 billion
($1.11 trillion) bond-buying program in a dramatic escalation of efforts to
prevent an economic meltdown.
As the coronavirus pandemic - and
the global economic fallout - intensifies, Fed officials delivered a series of
surprise announcements late on Sunday (Monday AEDT) aimed at coinciding with
the opening of financial markets in Australia
and Asia.
For the second time in less than a
week, it cut the target rate, taking it to a range of 0 per cent to 0.25 per
cent.
-----
In a fresh turnaround, Donald Trump swallows his pride for the good of the country
By Matthew Knott
March 18, 2020 — 12.25pm
Washington: Two days in the US capital, two
remarkable turnarounds from Donald Trump.
After weeks of downplaying the
threat of the coronavirus, the US President finally acknowledged the
seriousness of the pandemic on Monday (Tuesday AEDT).
Trump released new guidelines
recommending social gatherings be limited to under 10 people and found language
commensurate to the moment, describing the virus as a highly contagious
"invisible enemy".
A day later he appeared at the
White House and abandoned the planned centrepiece
of his economic response to the crisis: a payroll tax cut.
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Can Donald Trump lead America through the storm?
For
a fleeting moment this week, the US had a commander-in-chief, as Trump took
ownership of the decision to shut down the economy to avert a health crisis.
But it didn't last.
Mar
21, 2020 – 12.00am
As the eerie process of the
world’s biggest economy shutting itself down overnight spreads anxiety and
disruption across America, Donald Trump was shaping up to have one of the most
impressive weeks of his presidency.
For a few days Trump cast aside
his usual instinct for combat, blame shifting and demonisation. In its place
stood a commander-in-chief worthy of the title.
On Wednesday (Thursday AEDT) Trump
invoked Korean War-era laws that allow the president to
sequester private industries in a national emergency. He said he felt like a
“wartime president” tackling an invisible foe.
It was an important moment,
setting the scene for what lies ahead for younger people struggling to grasp
the magnitude of what looms and putting it into a broader historical context
that would have resonated with older Americans.
-----
'Unprecedented': Britain will pay up to 80 per cent of worker wages during coronavirus crisis
By Bevan Shields
March 21, 2020 — 5.38am
London: The British government has
launched an historic intervention in the economy by pledging to pay 80 per cent
of the wages of workers hit by the fallout from the rapidly worsening
coronavirus pandemic.
Prime Minister Boris Johnson
unveiled the unprecedented scheme while announcing all restaurants, cafes,
bars, cinemas and gyms would be forced to close indefinitely from Saturday.
As Europe grapples with the spread
of coronavirus, the Queen has fled London in an attempt to avoid contracting
the disease.
"For the first time in our
history, the government is going to step in and pay people's wages,"
Johnson said.
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US jobless claims point to massive job losses
Mar
21, 2020 – 10.57am
Weekly jobless claims - workers
asking for US government financial help after losing their jobs - are poised to
soar this coming week and for several more, economists predict.
Claims in the latest week rose by
70,000 to 281,000 - a 30-month high.
Fundstrat Global's Tom Lee sees
claims rising to between 1 million and 3 million "or worse" over the
next week.
ING is at 2 million; TD Securities
is at 2.5 million; Pantheon Macroeconomics forecasts 2-3 million claims; and,
Oxford Economics sees the potential for 4 million or more.
The claims data is a preview of a
potential massive drop in nonfarm payroll in April; Pantheon sees the job
losses "to be of the order of five million. We never imagined we’d write
anything like this.
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I look forward to comments on all this!
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David.
