Australia could experience a sustained recession into the second half of 2020, new research from Bank of America predicts, while the latest data from the Australian Bureau of Statistics offers little insight into the impact of shutdowns on unemployment in Western Australia.
Australia could experience a sustained recession into the second half of 2020, new research from Bank of America predicts, while the latest data from the Australian Bureau of Statistics offers little insight into the impact of shutdowns on unemployment in Western Australia.
WA unemployment was up 0.2 percentage points to 5.4 per cent in March, according to the latest data, but the ABS said the numbers had been collected in the first two weeks of the month, prior to the enforcement of major social distancing rules.
It particularly rose among females, increasing 0.5 percentage points to be 5.5 per cent, seasonally adjusted.
“The Aussie labour force survey will surprise most,” CommSec chief economist Craig James said.
“A modest near-6,000 jobs were added during March – defying market expectations for a 30,000 loss of jobs.
“In a surprising development, hours worked rose by 0.5 per cent in seasonally adjusted terms – the biggest lift in 14 months.
“We won’t really know the full extent of the impact of COVID-19 disruptions to the Aussie jobs market until next month and beyond.”
But work from other organisations has presented a guide.
Westpac-Melbourne Institute research found 7 per cent of people employed in March had lost their job, and a further 14 per cent had been stood down without pay.
“This survey result implies that over one in five workers have lost their entire wage income,” the report said.
But more than half of consumers were expecting to receive the government’s JobKeeper payment, a $130 billion wage subsidy package intended to encourage businesses to hold on to staff.
Bank of America’s latest research praised the federal government’s response to COVID-19, yet forecast a 4.4 per cent contraction in Australia’s GDP in 2020.
It will bounce back with growth of 3.5 per cent next year.
“In Australia, we expect the impact of shutdown and global recession to have a sizable but delayed impact, notwithstanding the proactive policy responses,” the bank’s research said.
“On top of a consumption slowdown in the June quarter, we expect the global recession to lower Australian exports more notably and thus reduce business investment and housing investment going into the second half of 2020.
“Overall, we expect Australia to experience a sustained recession into the second half with our 2020 GDP growth forecasts at -4.4 per cent.”
WA’s biggest export destinations are headed for rough waters.
The bank forecast growth in China of 1.2 per cent in 2020 and 8.8 per cent next near, projected a recession in Japan with a 4.1 per cent contraction in 2020, and slow growth of 0.3 per cent in South Korea.
“For China, we lowered our 2020 GDP growth forecast to 1.2 per cent year on year from 1.5 per cent year on year, with the biggest hit around the March quarter,” Bank of America said.
“To flatten the infection curve, China implemented a nationwide shutdown by extending its Lunar New Year holiday and conducting mandatory quarantines.
“As a result, the growth hit in our forecasts not only includes significant disruption to domestic economic activities, but also demand slump caused by weaker business and consumer confidence.
“Despite capacity restoration into March-April, the virus outbreak in the rest of the world will likely undermine a growth rebound into 2Q20 on sluggish external demand.”
The price of WA’s biggest commodity, iron ore, has stayed reasonably strong, at $US84 per tonne at the time of writing, but LNG exports, linked to the crude oil price, will likely suffer.
West Texas crude was trading at less than $20 per barrel at the time of writing.