I had a great chat this afternoon with 4BC Drive program presenter Scott Emerson about the Queensland economic outlook. Among other things, we chatted about the Deloitte Access Economics report which was nicely summarised by the Brisbane Times as ‘Queenslanders deserve to have a spring in their step’ with economy on track for a healthy year. Here’s the link to the audio, which should start at 46:00, just before my conversation with Scott:
Almost certainly 2021 should be better than 2020 for the Queensland and Australian economies, and we’ve seen a range of encouraging indicators (e.g. job vacancies, home loans, etc.). But, in my view, we shouldn’t get too excited just yet, given a lot of the confidence and retail spending (see chart below) we’ve seen in recent months is related to the extraordinary stimulus measures (JobKeeper and JobSeeker supplement) of the federal government’s, which are already being wound down and will end this quarter. The temporarily high level of retail spending in the second half of 2020 was well illustrated by the announcement from JB Hi-Fi of an expected 86% increase in profit in the first half of the financial year (see Online sales drive JB Hi-Fi to bumper first half result). This was no doubt related to stimulus measures and also to people spending money they would otherwise have spent on overseas trips. On just how generous the stimulus measures were, check out my post from last month (Aussies over-confident after being over-compensated by Gov’t for COVID-recession).
We also need to see how much financial damage was done to companies which were able to push back creditors last year due to temporary changes to bankruptcy law. With that protection having ended on 1 January (check out the AFSA website), it’s expected we’ll see a surge in insolvencies in the first half of this year, especially when JobKeeper finishes on 28 March. So, as then PM Kevin Rudd said about the global financial crisis in mid-2009, we’re not out of the woods yet. Over the next six months, Treasurer Josh Frydenberg is really hoping consumers and businesses will spend a lot of that reported $200 billion in savings they’ve accumulated over the last year, as reported last week (Australian households and businesses amass $200 billion in savings during COVID-19 pandemic).
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