Australia’s success in curbing Covid-19 infections is allowing it to slowly ease some restrictions even as it remains largely closed off from the rest of the world, taking its economy back to the pre-globalization era.
Mining and agriculture continue to support exports and a government-sponsored group is looking at ways to revive manufacturing. But the flow of foreign tourists, students and immigrants has been frozen, pinning hopes for a rebound on local consumption.
The closed borders and domestic reliance has the economy harking back to the 1980s, before the lifting of tariffs opened up trade and Paul Hogan offered to put another shrimp on the Barbie for international visitors.
Services Driven Nearly two-thirds of economic output from service industries
Australian Bureau of Statistics
Nominal gross value added, 2018-19
The capacity of services to quickly turnaround and the fact Aussies aren’t blowing savings on holidays abroad could help the nation fare better than many developed-world peers. Much will depend on the mood of households as unemployment rises, with a poor construction outlook adding to headwinds.
What Bloomberg’s Economists Say “Close to 1 million Australians per month traveled overseas in 2019. They will now be looking for a change of destination, heading to Noosa instead of Nusa Dua; Port Douglas, not Penang; and catching up with friends at bars in Melbourne Laneways, instead of Hong Kong’s mid levels. Containment measures change the economics of international travel.”
James McIntyre, economist
Household consumption, which makes up around 55% of the economy, has been boosted on the one hand by people stocking up on essentials during the lockdown, but hammered on the other as they couldn’t eat out or go to the movies. Shops and restaurants are gradually reopening but, for consumption to drive any rebound, households must put aside concerns over job security and debt to drive spending. That may be tough.
Wesfarmers Ltd. is seeing shift in consumer behavior across its retail portfolio. Home improvement and office products stores, Bunnings and Officeworks, have seen significant uplift in sales, while general merchandise stores, Target and Kmart, have seen sales slow.
Pessimistic households have consumption outlook seeming bleak Even before Covid-19, Australian households were among the most indebted in the developed world, with debt almost double disposable income. The threat of unemployment to people’s ability to meet their debts is now key, and the Reserve Bank of Australia has long acknowledged it as a major risk facing the economy.
The unemployment rate is currently 6.2%, with the central bank expecting it to peak at around 10%. Banks are offering repayment holidays to help tide homeowners over and have quadrupled provisions for an expected surge in bad debts.
Australia Passes Massive Stimulus Measures as Virus Spreads People wait in line outside a Centrelink office in the Bondi Junction suburb of Sydney, March 2020.Photographer: Brendon Thorne/Bloomberg The absence of skilled migration due to closed national borders will also hit pause on what had been steady stream of profitable mortgage lending for the banks. That could flow through to housing prices if sustained.
Commonwealth Bank of Australia said its base case is for an 11% fall in home prices, though in a prolonged downturn a cumulative 32% slump is possible. National Australia Bank Ltd. said in a severe downturn, prices could plummet 21% this year.
Uncertainty and job insecurity impacting property market Residential construction typically closely follows house price movements, and the sector was already scaling back activity following the previous flood of new stock still working its way into the market.
The RBA earlier this month said that indications from the initial stages of the development process suggests demand for new housing “has deteriorated significantly.” It expects dwelling investment to plunge 17% in the 12 months through June and remain a drag on growth until 2021.
Property investors have been hit by the six month moratorium on tenancy evictions during coronavirus. Without renewed interest from investors, it’s challenging to get a new apartment development, particularly of any size, into construction.
The same holds for business investment. Unless the project was already underway, or is related to creating a covid-safe environment, capital expenditure plans have been parked until demand returns.
Natural Endowment Things look brighter as you leave the cities. Internationally, Australia is known as a commodity powerhouse. While it accounts for just 10% of output, it is a key source of export income and prosperity in the country.
Iron ore shipments from Port Hedland, a key export hub, hit a record for April, while gold sales from Perth Mint -- the main refiner -- also surged. Fortescue Metals Group Ltd. lifted its projected annual iron ore shipments in a wager on China’s recovery. “We are selling everything we can possibly produce,” Chairman Andrew Forrest says.
Net exports important source of economic growth It’s less rosy for the liquefied natural gas producers. Just as the coronavirus sent the global economy into lockdown, Russia and Saudi Arabia began a standoff that sent oil prices tumbling below zero.
Top producers Woodside Petroleum Ltd. and Santos Ltd. have slashed spending plans and deferred flagship growth projects -- worth over $15 billion -- in line with drastic steps by energy majors worldwide to hunker down during the pandemic.
On The Sheep’s Back Virus Fears Grow In Sydney As Growing GDP Expected To Be Hit Rolls of toilet papers sit in an empty section of a supermarket in Sydney, March 2020..Photographer: Brendon Thorne/Bloomberg As supermarket shelves were stripped bare, a panicked nation was reminded of the sheer mass of food the country’s farmers produce. Domestic food production services more than 90% of fresh produce sold in supermarkets and still is able to more than match that amount in exports.
The industry could also become an unexpected source of employment. Backpackers and workers from Pacific Islands flock to rural areas to pick up work with seasonal tasks, but with borders shut and jobs being lost across the economy, farmers are likely turn to the local community for the extra labor.
Other producers have greater worries. Barley and meat exporters have been caught in China’s crosshairs in retaliation for Australia’s public call for an independent investigation of the coronavirus outbreak, while the wine industry is looking on nervously.
It’s been a tough year for wine, even before the virus. Clonakilla winery in New South Wales, north of Canberra, decided against producing a 2020 vintage after analysis showed unacceptably high levels of smoke taint from wildfires over the summer.
Exploring Our Own Backyard Australia's China Reliance Backfires as Virus Fallout Spreads Students sit on the grass at the University of Sydney, Feb. 2020.Photographer: Brent Lewin/Bloomberg The education industry was one of the first to feel the pinch from coronavirus restrictions. When the government imposed travel bans on flights from China in February, around 100,000 international students were unable to enter Australia to begin the academic year and left universities bracing for a costly fallout.
The University of Sydney, where students from China represented nearly one-quarter of the total student body, projected a A$470 million loss this year. Other institutions, including the University of Melbourne and Monash University, are bracing for similar hits. Even smaller regional institutions that don’t attract nearly the same level of international students have been affected.
With a lot of money at stake, there could be a relaxation of international border restrictions for students to study in Australia, before leisure travelers are allowed. But for businesses catering toward an offshore audience, demand is unlikely to snap back.
Qantas Airways Ltd. is currently operating just 1% of its network and has canceled overseas fights until at least the end of July. Its main competitor, Virgin Australia Holdings Ltd., collapsed into administration in April.
Virgin Australia Collapses After Pandemic Halts Air Travel Virgin Australia check-in kiosks inside a deserted Sydney Airport, April 2020. Photographer Brendon Thorne/Bloomberg Crown Resorts Ltd. and Star Entertainment Group Ltd., which both target big-spending visitors from Asia, were forced to close their casinos in Australia as the country locked down. Crown is just months away from completing a A$2.2 billion luxury gaming resort in Sydney.
The tourism industry was already reeling from the wave of cancellations following the December and January wildfires. The silver lining is that Australians will have no option but to spend holidays on home soil once inter-state travel is allowed again.
https://www.bloomberg.com/news/articles/2020-05-19/australia-goes-back-to-the-1980s-with-economy-closed-to-world?sref=s0L1qQ1H

Premier Daniel Andrews has announced a special taskforce of 500 police to enforce a shutdown of pubs, clubs and other venues and restrictions on social gatherings.

Key points:

• The Premier said Victorians had been "acting selfishly" by flouting social distancing rules
• Teachers are planning online learning for if schools close for term two, after the term one was brought to a close early
• Police will conduct spot checks to ensure people are complying with the shutdown

It comes as Victoria recorded another 59 cases of COVID-19 on Sunday, bringing the state's total to 355.
The announcement follows the Prime Minister's declaration yesterday that venues across the country would have to close from midday today to curb the spread of coronavirus.
While the National Cabinet agreed on the shutdown together, it was up to the individual states and territories to put the measures into law.
The "stage one" shutdown in Victoria includes pubs, clubs, nightclubs, Crown Casino, gyms, indoor sporting venues, places of worship, cinemas and entertainment venues.
Restaurants and cafes will only be allowed to provide home delivery or takeaway services. Bottleshops can remain open.
Mr Andrews told ABC Radio Melbourne any business not on the list could stay open, as long as it adhered to social-distancing measures such as ensuring there is 4 square metres for each person on the premises.
Indoor gatherings are still limited to fewer than 100 people.
Mr Andrews said many Victorians had been "acting selfishly" by ignoring social-distancing rules, and warned "people will die" if the measures were not followed.
He told ABC Radio Melbourne stricter measures were likely to be enforced after the next National Cabinet meeting on Tuesday.

What must close in Victoria:

• Pubs, clubs, hotels, bars and nightclubs that supply alcohol under a general licence (but bottleshops, takeaway meals and accommodation can continue)
• Gyms
• Indoor sporting centres
• Casinos
• "A cinema, nightclub or entertainment venue of any kind"
• Restaurants and cafes (but takeaways and deliveries can continue)
• Places of worship (but weddings and funerals can continue)

The Premier flagged a shutdown of "non-essential" services yesterday afternoon, ahead of a meeting of the National Cabinet last night.
He today denied suggestions his statement on Sunday caused confusion and panic, saying "this is not static. This is moving fast".
Mr Andrews acknowledged it was "frustrating and challenging" that the advice was changing.
"But it's nowhere near as challenging as people doing the wrong thing, and then we have 10,000 people who can only survive if they have a machine to help them breathe and we don't have enough machines and doctors to get that done."

Schools prepare for online learning in case of shutdown

Mr Andrews yesterday announced the school term would end at the end of the school day today, rather than at the end of the week as originally scheduled.
The National Cabinet last night agreed to keep schools open across the country.
"Term two is scheduled to begin on April 14, unless I have medical advice not to proceed with term two," Mr Andrews said this morning.
But he said: "I'm not making that announcement today."
Tuesday will be a pupil-free day for teachers to plan for online learning in the event schools need to remain closed beyond the school holidays.
Childcare centres and kindergartens are deemed essential services under the shutdown measures.
"But this is step one. There will be further announcements to be made," Mr Andrews said.

Police able to fine, detain, arrest

Police and authorised officers will also be enforcing a mandatory self-isolation period for anyone entering Victoria from overseas.
Under Victoria's state of emergency legislation, those breaking the rules face fines of nearly $20,000 for individuals and nearly $100,000 for businesses.
Mr Andrews warned the closure of pubs was not an invitation to have large gatherings at home.
He said last week, one person at a dinner party had coronavirus and by the end of the evening almost everyone had contracted the virus.

"This spreads rapidly. If you act selfishly people will die," he said.

"Many people are doing the right thing and I'm grateful to them."
Mr Andrews said it was people's "civic duty" to distance themselves from others.
He told ABC Radio Melbourne that the Government was arranging temporary accommodation for people experiencing an escalation in domestic violence because they were forced to stay at home
Emergency Services Minister Lisa Neville said police saw "quite a number of breaches in relation to indoor gatherings" over the weekend.
"We are upping the ante … this is such a significant issue in terms of people's lives, Victoria Police will have a dedicated team tasked with doing those spot checks and making sure people are following the rules in terms of social gatherings," she said.
"Police have the power to fine you, arrest you, detain you and they will use those powers where needed in the interest of community safety."
Mr Andrews said nobody had been fined or charged for disobeying the self-isolation rules.

Supermarkets, shopping centres stay open

Under the stage one shutdown, shopping centres can remain open.
Chadstone Shopping Centre in Melbourne's east, which is the largest complex in Australia, said only 10 stores out of more than 550 had closed on Monday morning.
"Our centres continue to trade as normal. The Federal Government has made it clear shopping centres continue to provide an essential service to our community," a spokesman said in a statement.
The shutdown is in place until midnight on April 13, but Mr Andrews said it was "highly likely" it would be extended beyond that.
The Government yesterday announced emergency relief packages would be provided to those in self-isolation.
On Friday, the Victorian Farmers Federation said the state had "plenty of food" and told those who were panic-buying to "settle your farm".
Full article from ABC news