Event: Jennifer Westacott panel interview with Samantha Armytage and David Koch, Sunrise, Seven
Speakers: Samantha Armytage, Chris Richardson, David Koch, Jennifer Westacott, Julia Lee
Topics: Job creation, COVID-19 recession, national accounts
Samantha Armytage, co-host Sunrise: We are joined now by our panel of experts. Chris Richardson from Deloitte Access Economics, Jennifer Westacott from the Business Council of Australia and Julia Lee from Burman Invest. Good morning to you all. Chris, we'll start with you, a seven per cent contraction in GDP, a million jobs lost, the weakest growth since the end of the Second World War. How shocked were you by these numbers?
Chris Richardson, partner Deloitte Access Economics: Look they are absolutely shocking numbers. They're not actually that surprising though. To get on top of the virus we had to make sure that people didn't move around and infect each other. They said stay home, close businesses, the impact of that as you note genuinely ugly.
David Koch, co-host Sunrise: Yep. To look on a brighter side if there is a brighter side Chris. Compared with the rest of the world we actually did pretty well didn't we?
Chris: Yeah look that's exactly right Kochie. As awful as these numbers are. It is worth remembering that Australia's outperformed the world in a bunch of ways. The chart up on the screen makes the point that the fall in Australia's economy is much smaller than you've seen in the bulk of the world. There are a handful of nations that have done better than us and that impact on economies is essentially how those nations have gone against the virus. If you've been relatively successful against the virus, as Australia has, even with what's happened in Victoria, damage to economies has been less.
Samantha: Chris interesting to note on that graph the only country above the line on that one at the end, China, and Vietnam a little smidge.
David: Its previous quarters were bad.
Samantha: Alright. Jennifer, our recovery here relies on job creation. How on earth do employers, how does the government achieve that right now?
Jennifer Westacott, chief executive Business Council of Australia: Well that's exactly right. We've got to get a plan to get people back to work and we've got to get a plan to create new jobs. That's about carefully, gradually reopening the economy so we can get activity again. It's about getting businesses investing again. It's about putting more money in people's pockets through things like the tax cuts that you've talked about this morning. And it's also about state and federal governments continuing to stimulate the economy through infrastructure projects, through giving tax relief, getting rid of the red tape so it's not so hard to get going. Every dollar we spend though has got to be a dollar that creates a job, fixes a problem, and gets the country moving again.
David: Jennifer the size of the stimulus was massive and that's evident in the fact that company profits actually rose 15 per cent in the June quarter because of that $50 billion in subsidies. We're on a bit of a sugar hit at the moment, aren't we?
Jennifer: Oh you bet we are. We always knew that JobKeeper was sort of like a blunt but necessary instrument. But it has had this weird effect. When we look at the real-world data on company profits, that is what companies have reported, 70 per cent have either fallen or have stayed the same and those losses are $30 billion. I think you are absolutely right, we're on a bit of a sugar hit. We've got to stay on the timetable to move off JobKeeper and get things back to normal because it is having that distortionary effect as you say.
Samantha: Yes. So household incomes have sort of risen, people feel like they've got more money because of JobKeeper and JobSeeker but the economy has fallen off a cliff. It's a tricky situation, Jennifer.
Jennifer: It is and they're not spending and in a couple of cases they've got nowhere to spend any money because the economy is shut down. For all the reasons that Chris has just gone through but also they're saving more. And part of that is that they're worried and they're anxious. And if you're a small businessperson you're not borrowing because you're not sure how you're going to get back up and running again. So part of the job I think of the October budget is to get the confidence back in the community and in business so that people start spending money again. And as I said, you've got to carefully reopen things so you can get activity going again.
David: And Julia Lee, there's certainly confidence in the share market, it’s retraced virtually all its plunge from March. Why?
Julia Lee, chief investment officer Burman Invest: I mean the economy is down and stocks are up. We saw that once again in the US with job numbers were very weak. But the US stock market reaching all-time record highs. Part of that is because the stock market tries to price in future and it looks ahead 12-18 months and hopefully by that stage we're looking at recovery. In fact, if we have a look at the month of August, the best-performing stocks on the Australian share market was some of those sectors and areas which were heavily hit by the virus. So things like travel as well as international education. In fact, corporate travel shares were up by 75 per cent for the month. An area that's been hard hit.
Samantha: Wow. Okay. Julia, you say that numerous factors right now point to the quote "seeds of the next boom", what do you mean by that?
Julia: A lot of people are scared that we're going to see another crash in terms of asset prices, house prices or even the share market. But when we see the huge amount of cash that's been hitting the economy, that usually sows the seeds of the next boom rather than the next crash. And it's a sign that we're on the path to recovery. So I guess what is known is that we are in a difficult economic situation at the moment and what's been priced in is recovery from this bad situation. What's unknown is the pace of recovery and how long it's going to take. So depending on the pace, we might see a bit more volatility and up and down movement. But for the time being the share market and hard asset prices are in recovery mode.
David: Chris, are we seeing a recovery in the economy? Because these figures are for April, May and June. We're in September now, since the end of June are you seeing a rebound in the economy?
Chris: There is some good news. You'll look at retail sales for July, believe it not, they were growing at the fastest pace in almost 20 years. It's still very patchy. It depends on virus numbers in Victoria going down and the ability to open up again. If we can do that then absolutely we can get through this.
David: Excellent. Alright team, thank you very much for that. Appreciate your time.