Any thoughts of a snap-back, V-shaped recovery in the Australian economy are long gone. With Melbourne only half-way through a second wave, 6 week lock-down the third quarter GDP data (which we will not see until December) may be negative, although our model is still projecting a modest q/q gain, and are sure to do little to reverse the sharp decline that the second quarter numbers will confirm next Wednesday.
The RBA in their most recent Statement on Monetary Policy released earlier this month, are projecting a decline in GDP of 6% in calendar 2020. Although their projection for the scale of the downturn has improved somewhat since May, their baseline scenario forecasts the recovery to be slower; under this scenario GDP returns to where it was prior to the pandemic during 2022, and this would be significantly below where trend growth would have had us by then. Their downside scenario sees that return to 2019 levels pushed out by many years.
The latest Google Community Mobility data, to August 23rd, is exhibiting a very similar shape to that in the chart above; a sharp fall and a slow grind back up. With the exception of Victoria, where the lock-down has caused another sharp fall, most states saw a steady improvement in mobility through May and June that has only more recently stalled. Those states where the pandemic has been more controlled (QLD, SA and WA) continue to do better than others but even here there appears to have been little, if any, improvement over the past month.
We have excluded the Parks and Residential indexes from the following chart which considers just ‘economic activity’ in some select QLD Local Govt Areas (where full Google data is available).
Ipswich and Mackay, where there will have been only limited impact from the tourism slow-down caused by closed borders, have already returned to close-to-normal levels of activity. Tourism affected areas such as Cairns and the Sunshine Coast have done less well, but the real challenge has been in the Gold Coast and Brisbane – areas where the intermittent, minor virus flare-ups over recent weeks might have impacted people far more than in those areas to the north.
Despite the better health outcomes than some other states QLD’s economic activity remains about 11.5% below pre-pandemic levels, although this is only half the national average 23% fall.