How is our economy supposed to survive a second wave, when the impacts of the first one are still surging? The unemployment rate escalated to an unfortunate high at 7.4%, the highest it has been in over two decades. Gear up, for experts say 95,000 NSW jobs could be hit by a second lockdown.
In response to the Great Depression, my man Keynes said himself that periods of economic downturn may be cushioned by implementing stimulus packages. In response to the unemployment allegations above, make way for JobTrainer! Another addition into the stimulus package family, aiming to reform the future of the labour market through subsidising: vocational training and apprentice wages. Based on industry predictions by the National Skills Commission (NSC), this $2bn injection into the workforce focuses on providing free to low-cost training towards fields such as healthcare, manufacturing and trade. The success of previous government supports have prevented unemployment from rising to a predicted, whopping 13%. Let’s hope the predicted 340,700 job creation figure from this package can shield the economy and prevent future structural unemployment.
Speaking of economic downturn, Victoria’s gross state product is expected to fall 1.6% in 2020-21. Their surging COVID cases, plus its high dependence on education exports to international students, seems like a recipe for vulnerability. Moreover, the medium-term effects seem to fall directly on their construction sector.
“With high levels of uncertainty, and an unexpected drop in population growth, construction is likely to suffer a severe setback over the coming year.” – Deloitte’s Chris Richardson
Demand for high-rise infrastructure such as office buildings and apartments are declining, while previously implemented projects are already half-way finished. We can hope to see Victoria benefiting the most from JobTrainer!
In contrast, Western Australia seems like they’re thriving. We can thank strong commodity prices, as iron ore prices sit above $US112 per tonne. Strong inelastic demand from China and supply issues from Brazil sees a possible increase in dividends and wage growth benefits for investors and employees respectively. With commodities constructing 40.6% of Australia’s exports, an increase in prices, simultaneously increases demand for the AUD. Valued currently at $0.70 USD, this has picked up ~24% from its GFC-level low value at 0.55, back in March. At least this seems progressive, it’s as a small step into the economy’s recovery journey.
The ASX 200 finished 1.9% higher at 22.7 points on Friday, while seeing healthcare and utility stocks fall along the way. On the contrary, the progression of the COVID vaccine, sees companies such as Moderna and AstraZeneca sees their shares up 6.9% and 5.5% respectively overnight. The monthly survey from Westpac and the Melbourne Institute showed consumer sentiment deteriorating due to the re-emergence of COVID-19 cases in Melbourne. Total trading volumes were again low on Friday at 580 million shares traded, an ongoing theme that has played out over the past two weeks.
Source: Sydney Morning Herald
References/ further readings
- https://www.abc.net.au/news/2020-07-16/iron-ore-price-boosts-western-australia-economy-despite-covid-19/12460916
- https://www.smartcompany.com.au/coronavirus/apprentice-wages-training-subsidies/
- https://www.abc.net.au/news/2020-07-06/victorian-economy-hardest-hit-by-coronavirus-fallout/12426234
- https://www.abc.net.au/news/2020-07-16/dow-europe-stocks-rise-on-coronavirus-vaccine-progress-asx-falls/12460572
- https://www.smh.com.au/business/markets/asx-tipped-to-rise-despite-wall-street-retreat-20200717-p55cx7.html
- https://www.abc.net.au/news/2020-06-02/australian-dollar-surges-on-iron-ore-economic-optimism/12312542