Market update

A snapshot of the Australian economic landscape in 2020’s second quarter.

  • Spring 2020

    A line graph mapping the economic impact of Covid-19.

    The Australian economy is going through a difficult period and is experiencing the biggest contraction since the 1930s. 

    In July the Treasurer Josh Frydenberg announced Australia’s largest budget deficit in more than 70 years. 

    The COVID-19 virus caused the economy to be shut down for a period which necessitated life-support from the Federal Government.  

    By the end of July, the Federal Government had delivered around $300 billion in support measures to mitigate the economic impact of the recession.

    Consumer prices fell by 1.9% in the June quarter, the single largest three-month fall in 72 years. The fall, which took annual inflation to minus 0.3%, was led by a 95% drop in the cost of childcare. Childcare was made free by the Federal Government in response to the coronavirus pandemic. But prices for other goods and services also tumbled through the period. Petrol prices dropped by 19.3%, preschool and primary education costs fell by 16.2% while rents went down by 1.3%.

    The Federal Government's July economic update estimates another 240,000 people will be out of work by the December quarter bringing the jobless rate to the highest in more than two decades. There are official forecasts for Australia's unemployment rate to reach 9.25% by the end of the year. At the time of writing, Australia’s unemployment rate was 7.4% (July 2020). ANZ Job Ads rose by a record 42% month on month in June but remain down 44.6% year on year. On July 21 the government announced an extension of both JobKeeper and JobSeeker payments.

    As widely expected, the Reserve Bank of Australia (RBA) left the cash rate unchanged at 0.25% at their August board meeting. Annual inflation turned negative, down 0.3 per cent to 1.3 per cent over the past year. The RBA has made it clear it would not lift rates until it was confident inflation was back within its 2-3% target band and progress was being made towards full employment.  

    The CoreLogic home value index, covering the eight major Australian capital cities, fell by 0.8% in June. Annual growth eased to 8.9%. Sydney prices were down by 0.8% with Melbourne down by 1.1%. The ABS said the 1.3% fall in rents reported in July was the first quarterly drop since this measure started in 1972. Total housing finance decreased by 11.6% in May, with both owner-occupier and investor financing falling by 10.2% and 15.6% respectively.

    Investors continue to experience a rollercoaster on the share market. At the time of writing the ASX 200 had managed to edge ahead 0.5% for the month of July - its fourth straight monthly gain. However investment firm Macquarie Group warned of an uncertain economic recovery at its annual general meeting. Macquarie said markets remained volatile and bad loans were rising. Listed companies were expected to slash dividends when they report over July-August. Globally, conditions in financial markets have improved. Volatility has declined and there have been large raisings of both debt and equity. The prices of many assets have risen. Bond yields remain at historically low levels.

Back to top