SBS On the Money LIVESTREAM | Lockdown to hit economy hard + markets

SBS On the Money LIVESTREAM | Lockdown to hit economy hard + markets

hi everyone it’s your daily 10 minute business and finance news wrap for this wednesday the 28th of july 2021 later how china’s moves on its tech sector has impacted global markets but first to the extended lockdown in sydney which is set to hit economic growth and while australia may avoid a technical recession it may also feel like a recession in some places anyway for more i spoke earlier with the commonwealth bank’s senior economist belinda allen belinda to what extent will these extended lockdowns hit the australian economy so we expect to see quite a severe impact on not only the national economy but also the new south wales economy as well and the main reason for that is greater sydney contributes around 25 to the national economy so the severe lockdown we’ve seen in greater sydney it’s already lasted five weeks stated to last another four weeks with probably restrictions in place after that will obviously have a sizeable impact on the economy so we do expect the third quarter economic growth to contract by 2.7 and we should see a small recovery in the fourth quarter as well but as a result growth over 2021 will come in lower than what we had expected pre-lockdown pre-lockdown we had expected the australian economy to expand by over five percent in 2021 that figure now looks closer to 3.6 so that’s not two consecutive negative quarters of growth which means we avoid a technical recession but given it’s still a fall of 2.7 will it feel like a recession oh it will definitely even for new south wales so our forecast for state final demand which is uh similar to a national gdp we have the new south wales economy going backwards by nine percent so that’s obviously a very large decline so for the people of greater sydney obviously we’re going to feel the brunt of those impacts it won’t be two quarters but i think when we look at just the sharp fall but also the impact on the labor market which is crucial to that it will feel like a pretty deep downturn and we do expect in greater sydney around 300 000 jobs to be lost and the national unemployment rate to lift from its current levels of around 5 to closer to five point six percent overcoming months so you’ve seen these big falls in sydney what are the flow-on effects to the rest of the country i think they’re still learning about how interconnected the different state economies are one of the ways that we can look at that is by looking at what’s been happening in our cba household card spending data so obviously we’ve seen new south wales card spending fall dramatically we’ve seen spill over to the act i think just given how close those two economies are victoria and south australia have been in lockdown but we noted when those two economies were in lockdown the tasmanian card spending data has also slowed and just elsewhere we have seen a bit of a slow down as well i think crucially and all of this will be the impact on confidence i think there’s a bit more uncertainty creeping in about the control of the delta variant and if we see further outbreaks so we could see some cautiousness creeping in those other states so what does this all mean for rba policy so it’s a good question so here at cba we did have quite an aggressive view on the rba so we had expected them to start to raise the cash rate in november 2022 just given our optimism about how the economy was going to be performing at the tail end of 2021 and into 2022. obviously given uh the downturn that we’ve seen will result because of these outbreaks uh we have had to push back that first rate hike by the rba we now expect that in may 2023 but then for rates to to live from them just because the australian economy in 2022 barring any major covert outbreaks or lockdowns should look really good expansionary fiscal policy and monetary policy will be in place the labor market should charge in quickly given the closure of those international borders and we have a war chest in household savings at the moment that should only expand given we really can’t spend our money uh very widely at the moment so we do expect household savings to continue to lift the economy should recover and the rba should be set to lift interest rates in 2023 are there any upsides though to your forecast i mean what’s the best way out of this so the best way out of it is obviously the vaccination program so we had a good look at the roll out of the vaccine program and what level the government seems willing to want maybe around 80 of the adult population it’s kind of late october when those numbers start to look in line if it’s early that will help but the upside definitely will come from vaccine roll out no more lockdowns and that should really help the australian economy expand belinda allen there from the commonwealth bank the australian share market fell on news of that extended lockdown the s p a 6 200 down 0.7 percent 7 379. tech stocks were down also along with the miners and banks but there was china something to do with it for more i spoke earlier with adam dawes from shaw and partners adam the market’s down today why yeah a really interesting one i think it was obviously a soft lead from wall street overnight plus then also we’ve started to see inflation numbers sticking ticking up a little bit today which certainly didn’t uh affect the market plus u.s futures also negative so i think we’re following that so there’s a couple of reasons why we’re down today there’s an interesting international story going on right now china is clamping down on technology companies there especially those that have some sort of foreign interest right it really hit those technology stocks in the u.s like amazon your 10 cent overnight the hang sen got slammed yesterday what’s this all about and what are the implications for australia if any yeah look it certainly is it’s shaking up those regulations and especially in those tech companies that are suffering the most china’s technology sector regulator ordered the country’s internet giants to fix certain anti-competitive practices and data security threats and breaches so basically that means that they put a range of a range of sanctions or on these kinds of things china’s ministry of industry and information technology which oversees china’s telecommunications industries and policies said in the next six months a program is aimed to correct a range of industry issues including disruption market orders and infringing on info on users rights so basically they didn’t specify any names but as you absolutely said uh most of these tech giants in the last 12 to 48 hours have seen over 237 billion dollars wiped off their market share and that is with the hang seng which is like the nasdaq tech sector so it’s not fantastic for these international companies does it relate here to australia yes there is a little bit of relation there but it really is those ones that potentially might be looking to deal with china or deal with china in in the future but certainly our stocks today haven’t been affected as much as some of those larger ones on the hang sen and this is going to get very busy over the next few weeks it’s profit reporting season here in australia what are you expecting what are the themes yeah look speaking for earnings upgrades really and that’s going to be driven by higher commodity prices and the booming housing market so that’s what we’re expecting some of the themes that we really like at the moment are that we’re seeing a lot of low implied volatility in the market which says that there potentially will be some more bullish outcomes for those results also looking for the banks to report some really strong numbers on their credit growth and see how their housing market is going forward plus then also the dividends in the material stocks in the mining sector i think they’re going to be looking very attractive and it’s going to be very interesting to see what they come up with that so there’s going to be some really big points for our reporting season this year adam dawes there from shawn partners and after the markets closed rio tinto became the first of the majors to post their profits uh up around 156 for the half year that’s underlying profit to 12 billion us dollars of course it has been a major beneficiary of government stimulus which has uh prompted an increase in infrastructure projects around the world which need iron ore there’s been a short supply of iron all around the world pushing up prices so companies like rio tinto have benefited as a result and shareholders will be showered with a bit of a huge payout 262 percent higher than in 2020 and that includes a special dividend i think it’s around 5.16 uh us per share that is sbs on the money for this wednesday don’t forget you can listen to this as a stream on your favorite podcast app including the sbs radio app spotify and apple podcasts this on the money stream is provided for informational purposes only the content in this stream should not be understood as constituting advice or a recommendation it’s not personal advice and it doesn’t consider your personal circumstances or objectives you should contact a licensed professional before making any financial decision
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SBS On the Money LIVESTREAM | Lockdown to hit economy hard + markets

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