May 2020 Insights

After an extraordinary month of social and economic hibernation, there are positive signs that some of the restrictions on our everyday lives will soon be loosened somewhat. This is welcome news for households, businesses and our economy.

Data released in April provided an early insight into the impact of the coronavirus on the Australian economy. Inflation rose by an unexpected 0.3 per cent in the March quarter, lifting the annual rate from 1.8 per cent to 2.2 per cent. The biggest increases were food, alcohol and tobacco and health. The biggest falls were petrol, travel and accommodation.

Retail sales jumped a record 8.2 per cent in March as consumers stocked up on food and essentials ahead of the shutdown. New home sales fell 23.2 per cent in March while new vehicle sales were down 9.1 per cent in the year to March as Australians reassessed their finances. But consumer confidence rebounded in April, with the ANZ/Roy Morgan consumer confidence index lifting to 85 points, up from record lows of 65 points in March. National petrol prices fell to an average of 100.6c a litre in April, the lowest in 15 years. This follows a further 22 per cent drop in global crude oil prices in April as a result of a glut in supply.

Business confidence was also at record lows in March, with the NAB index falling from -2.4 points to -65.6 points. Unemployment rose slightly to 5.2 per cent in March but Reserve Bank Governor, Philip Lowe said in a speech that he expects the rate to climb to 10 per cent in the June quarter and remain above 6 per cent for the next few years. He also expects inflation will fall significantly in the June quarter as our economy contracts but said: “We can be confident that our economy will bounce back”. The Aussie dollar rose over 6 per cent in April to over 65 US cents, perhaps due to Australia’s success to date in dealing with the coronavirus.