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Bathurst 1000 ticketing, camping restrictions deal ‘massive’ economic blow to local businesses


It is going to be a very different kind of Bathurst 1000 this year with only 4,000 tickets per day on offer due to coronavirus restrictions.

The great race’s carnival normally starts days before the climactic 1,000-kilometre endurance race on Sunday.

Event organiser Supercars normally sells 50,000 tickets a day to watch the action unfold at Mount Panorama-Wahluu.

The restrictions mean a dramatic reduction in the number of people visiting the town and a potentially “quite massive” hit to businesses, including The Oxford Hotel.

He said the school holidays, and particularly weekend warriors from Sydney, brought a welcome injection of cash to the town during the pandemic, but it would not make up for an influx of race fans.

“Traditionally, it’s that one week where it picks us up after a cold and slow winter,” he said.

“Winter traditionally is our quietest time, it’s everyone’s quietest time, and then it sort of wakes us up and gets us ready for summer.”

A man leans against a bar with a large array of various alcohol bottles behind him. Two beer taps are in the foreground.
Ash Lyons says race week is generally the peak of his hotel’s entire year.(ABC Central West: Mollie Gorman)

Mr Lyons said he has rostered staff for a rush similar to school holidays, but he was not sure what to expect.

‘No icing on the cake’

Camping is an important element of the Bathurst experience, with thousands of people flooding into campsites on Mount Panorama days out from the start of races.

But this year there’s no camping on the mountain due to COVID-19 restrictions, and ticket holders have been told to find accommodation in town instead.

Kangaroos in a field with the Mount Panorama sign in the background.
Bathurst is within a few hours’ drive of Sydney and brings many tourists to the region, despite the pandemic.(ABC Open: Tim Bergen)

Elaine Hamer runs a farm stay at Perthville, 7 kilometres from the track, or 2km as the crow flies.

She said normally up to 150 campers stayed in her paddock. This year, she expected no more than 20.

“V8 weekend is usually the weekend where there’s a little bit of icing on the cake as far as the business goes,” she said.

“Certainly it’s going to affect my overall annual income.”

A woman wearing a blue shirt and broad brimmed hat holds a lamb and a bottle next to a pen with three other orphaned lambs.
Elaine Hamer has been offering camping to Bathurst 1000 fans for 12 years.(ABC Central West: Mollie Gorman)

Some of her regular customers, including security guards and members of a race team, are still camping.

She said that helped mitigate the pain of refunding thousands of dollars to other campers.

“Normally you think of nothing else except maintaining amenities, garbage, checking people in, checking who’s driving in,” Ms Hamer said.

Soccer club missing out

The Bathurst City Red Tops soccer club runs a canteen at the top of Mount Panorama, feeding hungry campers with a sausage sizzle.

There will not be any spectators up there this year.

Fiona Prosser said the club will miss out on thousands of dollars of fundraising.

“It helps with families who are disadvantaged financially or have had issues with family violence,” she said.

“It also helps with any kind of uniforms that are required … any kind of equipment, balls, cones.”

A woman stands with parkland behind her.
Fiona Prosser’s soccer club raises money through their canteen at the top of Mount Panorama, but spectators and campers aren’t allowed there this year.(ABC Central West: Mollie Gorman)

Ms Prosser said some of the campers who cannot be at the race this year have created a social media campaign to ensure the money they would normally spend on a steak sandwich still finds a way to the club.

And while the Bathurst 1000 is still going ahead with reduced numbers, other events at the track that the canteen caters for have been cancelled.

“If it continues like this then we are going to be in a bit of strife because we’re a self-funded soccer club,” Ms Prosser said.

The general manager of the Bathurst IGA, Isaac Bernardi, said he was not sure what the impact on supermarket sales would be.

He said the boost was effectively double a normal weekend — particularly for items like alcohol, snacking and finger food, and chairs.

“It’s a spike in revenue the town looks forward to. It’ll be sorely missed if we don’t get the numbers of people attending that we did as previous years,” Mr Bernardi said.

“It’s not just the Bathurst 1000, we operate in a number of towns and there’s a lot of events that have been cancelled.

Watch Brock: Over the Top at 8.30pm Tuesday November 3 on ABC TV+iview



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The economic legacy of Sydney’s Olympics is still taking shape


The taxpayer-funded construction of venues and infrastructure did fuel a growth spurt in Sydney. Estimates by economist Terry Rawnsley show the city’s economy grew at a super-strong rate close to 5 per cent in the two years before the games. But a nasty hangover followed. Sydney’s annual growth rate fell sharply after 2000 and remained subdued for some years, although many factor contributed to the slowdown.

But investments on the scale of those made to host the Olympics have effects that play out over many decades. With 20 years of hindsight it’s apparent hosting the games has delivered some important long-term economic benefits.

The Sydney Olympics were staged in the middle of a historic phase of globalisation which took off around 1990 and lasted until the global financial crisis in 2009. A striking feature of that period was the emergence of highly connected, internationally-oriented cities which thrived amid the rapid growth in trade. Those “global cities” have become the command posts of the international economy.

For a middle power city like Sydney, hosting the games in 2000 was ideal. It helped frame Sydney as a big-league city at a moment of rapid global integration.

The games were a well-timed global advertisement for Sydney’s capabilities. The way the event was staged – with efficiency, safety and gusto – was positive for investor confidence in Sydney (and Australia) and helpful to our export industries.

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The games took place just as lucrative new tourism markets were opening up in emerging Asian economies, especially China. The event was also staged on the cusp of a boom in international education, a sector which has grown rapidly in Sydney during the past two decades.

“Having all those images shown on TV globally of such a successful event, in a city that’s nice to be in, served us well and certainly helped our exporters,” says AMP’s chief economist, Shane Oliver. “It showcased Australia’s talent.”

Perhaps even more valuable is the way the Olympics transformed the geographical heart of Greater Sydney.

It’s easy to forget much of what we now call Sydney Olympic Park was a toxic waste dump prior to the games. Contaminants at Homebush Bay, as it was known, included petroleum waste, unexploded ordnance, chemical waste, power station ash, gasworks waste, asbestos, industrial hydrocarbons demolition rubble and domestic garbage.

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The Olympics provided the justification of a much-needed clean-up. Between 1992 and 2000 the NSW government spent more than $130 million to remediate pollution spread across 400 hectares.

Without the games, it’s difficult to imagine a government committing the resources for such a comprehensive renewal.

“If the Olympics hadn’t come along Sydney might still have a giant waste dump taking up hundreds of hectares of prime land in the heart of the city,” says Terry Rawnsley who is an expert in regional economics.

“That’s the counterfactual universe in which Beijing got the nod for the 2000 Olympics and Sydney never hosted the games.”

The Homebush Bay clean-up greatly improved the amenity of western Sydney and the economic dividends flowing from that makeover are substantial.

Olympics-related remediation work paved the way for the transformation of adjacent suburbs, especially Rhodes, and the creation of the new ones at Wentworth Point and Newington. The extensive green spaces established at Sydney Olympic Park also facilitated high-density residential development in the vicinity, adding to Sydney’s supply of well-located housing.

The post-games planning of the Olympic precinct has come in for some justifiable criticism, especially its empty feel and lack of vibrant urban spaces.

Even so, Sydney Olympic Park has emerged as an important commercial hub.

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The output of the Homebush Bay-Silverwater statistical area (which is made up largely of Sydney Olympic Park) reached $5.54 billion in 2018-19, according to Geospatial Economic Modelling by the consultancy PWC. That makes it the eighth largest local economy in NSW and bigger than some long-established commercial hubs including Chatswood-Artarmon and Mascot.

Last year, Sydney Olympic Park Authority had more than 4000 residents and its venues, businesses and institutions hosted almost 20,000 workers and 2000 students. Around 10 million people now visit the area for business or leisure each year, more than double the number that attended the 2000 Olympic and Paralympic Games.

The economic output of the suburb will grow considerably once it is connected to both the CBD and Parramatta by the West Metro rail project due for completion around 2030.

The economic legacy of Sydney’s Olympics is still taking shape.

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We must be able to debate the economic risks we face


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Most Australians, and Victorians, want to fight the virus at any cost. Only a minority share the Morrison government’s concern to fight the virus but also protect jobs, incomes, opportunities – and social and mental wellbeing.

Many switch off at talk of the damage our single-minded approach is doing. They think the economy means big business. But jobs, incomes and opportunities are what the economy is about — livelihoods and wellbeing. It’s about people like friends of mine who followed their dream and borrowed to start a business. For most of 2020, they have been in lockdown, unable to operate, running up costs with only JobKeeper for income. And their town has not had one case of coronavirus.

Tens of thousands of small businesses all over Australia have similar stories. In Victoria, the Bureau of Statistics reports that in July, one in four full-time jobs for young people had gone from a year earlier; 100,000 young Victorian school-leavers had no job.

That is what we mean when we talk of the economy. It is why it matters that we find rules that fight both the virus and the great economic slump.

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The economic risks we face are immense. Whether it ends up as a recession or depression, this crisis has changed Australia’s future. For some time, we will be a poorer country, with fewer businesses, fewer jobs, more debt, weaker prospects. The same will be true of the world – but Victoria’s future has darkened more than most. The state must create more room for economic activity to flow, to protect what we have, and our kids’ future.

But most Australians have wanted to focus solely on fighting the virus – until now – and our governments have obliged. We have closed our borders to the world, forbidden people to leave the country. States free of the virus have closed their borders to people from states where the virus rages, flickers, or used to flicker.

In Victoria, the Andrews government has shut down tens of thousands of workplaces, imposed a curfew and banned Victorians from having visitors at home – even in country areas with no coronavirus – or travelling more than five kilometres in Melbourne, or from doing countless things that gave joy and meaning to our lives. And until now, most Victorians have supported all this.

But the fortnightly Essential poll in The Guardian found Victorians’ support for the state’s handling of the crisis had slipped to 50 per cent even before last Sunday’s announcement that Melbourne would stay in lockdown and quarantine for at least another six weeks. And two polls taken since then were as polarised as the population.

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A Roy Morgan poll found 70 per cent of Victorians approve of Andrews’ performance as premier and clear majorities support the curfew and the ban on eating out, though not the ban on having visitors.

But MediaReach polling for the Liberal Party in five marginal seats, leaked to the Herald Sun, claimed an average 14 per cent swing against Labor, enough to toss it from office if it came on election day.

The state’s “road maps to reopening” offer little hope. Even in late October, the curfew and lockdowns would be lifted only if new case numbers drop below five a day – per capita, only Taiwan among our peer group would qualify – and if health officials have solved all but five of the daily “mystery cases”. To return to anything like normal life would require first eliminating the virus for 28 days.

And the road maps end with Australia’s borders still closed. What happens when we reopen, not just to the 23,000 Australians stranded abroad and trying to get home, to our wider families waiting to reunite, to foreign students and tourists?

In a world awash with coronavirus, elimination is only temporary. Any reopening and the virus will return. New Zealand eliminated it, only to find it back again after three months, sparking 250 new cases and forcing Auckland into stage three lockdown. One planeload from India had 17 new cases. If that happened here, would Andrews, likewise, force Melbourne back into lockdown?

His plan is extreme. It risks strangling thousands of businesses we will need to provide future jobs and incomes. It must be redrafted – and with caseloads dropping much faster than its modelling predicted, Andrews has a good reason for rebalancing.

Let’s open our minds. Victoria’s most senior federal Labor frontbencher, Bill Shorten, told the Australian Financial Review he hoped “the restrictions would come off a bit quicker”, with more aid to small business. He thinks we need a better plan. So do many of us.

Tim Colebatch is a former economics editor for The Age.

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Italy fears economic ‘catastrophe by October’ as tourists vanish


“It has taken the country back to levels of GDP of the early Nineties,” says Federico Santi, a Europe analyst with Eurasia Group.

The number of Italians who will lose their jobs as a result of the pandemic and the ensuing three-month lockdown, one of the strictest in the world, is not yet known. Amid warnings of social unrest, the government has extended until the end of the year a scheme under which companies receive financial help to keep on their employees.

A ban on firing people has also been extended until December but it will have to come to an end at some point, and depending on the strength of economic recovery, it may just delay the inevitable.

Tourism collapse

More than one third of Italian businesses now say they are at risk of closure, according to Istat, the national statistics agency, despite the government providing cheap loans, furlough schemes and emergency welfare support.

“The impact of the crisis on businesses was of an extraordinary intensity and rapidity, leading to serious risks to their survival,” said the agency’s Roberto Monducci in a recent presentation to parliament. Tourism is one of the most visible sectors to have been hit hard by COVID-19. Millions of tourists who would normally have headed for the beaches of Sicily or the canals of Venice have stayed away this summer, depriving the country of billions of euros in revenue.

International arrivals were down by 90 per cent by the end of July, according to the national tourism agency, Enit. Five of the most famous destinations – Rome, Venice, Florence, Turin and Milan – will lose €7.6 billion ($12.5 billion) in revenue this year as a result of the dearth of foreign visitors, said a report by business group Confesercenti.

There will be 34 million fewer tourist “presences” – or overnight stays – this year compared with normal years and thousands of businesses risk going bankrupt, it said.

Venice is the worst affected city and is predicted to lose more than 13 million overnight tourist stays this year, amounting to €3 billion in lost revenue.

“Tourism is paying a very high price for the emergency caused by COVID-19,” says Patrizia De Luise, the president of Confesercenti. “It’s a situation of exceptional gravity that requires extraordinary measures.”

The collapse in the number of foreign visitors has been extraordinary.

In Rome, 218 Americans arrived in June compared to 249,000 in the same period last year. Just over 100 Russians arrived, compared to 19,000 last June.

If it goes on like this, we risk a catastrophe by October. We are expecting up to 26,000 shops to close. That is one in three. For the economy of Rome it will be a disaster.

Confesercenti’s Valter Giammaria

“The hotels are empty. Only 200 out of 1200 have reopened and even some of those are closing down again, with some not opening until March next year,” says Giuseppe Roscioli, president of the Rome branch of Federalberghi, a hoteliers’ association.

The absence of tourists has had a devastating knock-on effect for many businesses. Since the end of lockdown, 3000 commercial activities in Rome have closed down, excluding bars and restaurants, according to Confesercenti. “That means thousands and thousands of families who no longer have an income,” says Valter Giammaria, the head of the association’s Rome chapter.

“If it goes on like this, we risk a catastrophe by October. We are expecting up to 26,000 shops to close. That is one in three. For the economy of Rome it will be a disaster.”

Mozzarella crisis

The collapse in customers is not just because of the lack of foreign tourists; with millions of Italians still working at home, they are not travelling and spending as they normally do.

“We can’t do much about the lack of foreign tourists – we won’t see them come back en masse until there is a vaccine,” says Giammaria.

“But an additional blow has been smart working. People are no longer going out to buy a pair of new shoes or a dress or go to the hairdressers.”

The national lockdown and consequent decline in demand for goods and services has hit the whole economy, not just tourism. To take one example – farmers who produce mozzarella from herds of water buffalo in the south of Italy are in crisis. Demand for the creamy white balls of cheese is down by a quarter as a result of restaurants and hotels being closed during lockdown, according to the consortium that represents mozzarella producers. The contraction left farmers with around €35 million worth of unused milk and threatened the jobs of the sector’s 30,000 employees.

Demand for Mozzarella is down by a quarter as a result of restaurants and hotels being closed during lockdown.

Demand for Mozzarella is down by a quarter as a result of restaurants and hotels being closed during lockdown.Credit:Shutterstock

Amid the gloom, there are glimmers of hope and tentative signs of a recovery. Some businesses are bouncing back. Industrial output increased by just over 8 per cent in June and there are expected to be more positive signs in the third quarter of the year.

Italy was given a massive boost in July when Brussels agreed on a €750 billion stimulus plan for the EU, 28 per cent of which is due to go to Rome. The €209 billion destined for Italy will not be disbursed until next year, but might just give the country enough breathing space as it anxiously waits for economic recovery to kick in.

“We should see signs of recovery in the third quarter,” says Santi from Eurasia Group. “The most recent data were relatively encouraging in terms of retail sales and industrial output, although they were still low compared with pre-crisis levels.

“I would say there are optimistic signs. Business activity has picked up since the lifting of the lockdown.”

Tourism is starting to rebuild. Millions of Italians flocked to beaches and mountain resorts this month and the first post-crisis cruise in the Mediterranean departed when the MSC Grandiosa left Genoa on a week-long tour of ports in Italy and Malta.

“The tourists are returning,” says Andrea Rotondo, the president of the Rome branch of business body Confartigianato. They are a “breath of oxygen” for the city’s hotel and restaurant owners, he adds.

But a halting recovery could be wiped out again if there is a brutal second wave of COVID-19.

Already, the signs are worrying – in mid-August, daily cases topped more than 600 for the first time since May. They have since doubled to more than 1200 on Sunday. On Saturday, there was a similarly alarming number – 1071 cases. The total number of deaths from coronavirus in Italy is over 35,400.

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With fears that summer nightlife at the beach is fuelling a return of the virus, the government ordered nightclubs across the country to close.

Ministers and health experts have warned they will not hesitate to impose new lockdowns if there are significant outbreaks of the virus in the autumn and winter, and that would imperil the country’s hesitant recovery.

“We still have a manageable situation. But it is precarious and the quantum leap can be very fast,” says Agostino Miozzo, an expert who advises the government on the coronavirus emergency. Local lockdowns “may become inevitable if the situation gets out of hand”.

The Daily Telegraph, London

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The economic crisis is still to come


The economy is already broken. Devastated. The economic crisis is still to come. Realise this: in 2008-09 the government spent tens of billions of dollars keeping the economy going. In 2020 the government has already spent hundreds of billions of dollars to stall the economy. We haven’t begun restarting the economy.

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Victorians are panic buying. Again. Who can blame them when the Premier keeps saying you’ll be able to buy what you “need” – whatever that means – not necessarily what you “want”. He is trying to be reassuring; but everyone knows that government has a poor track record in providing what people need, let alone what they want. The Victorian government is trying to micromanage supply chains and distribution. This is not going to end well. It never does.

It gets worse. Both state and federal government are in denial. They seem to think that this is a “business-as-usual” crisis. That somehow when they give the all-clear that we’ll emerge – as if from hibernation – from our homes, squeeze into our work clothes, give up our day-drinking, and go back to work. This is the snap-back view. Similarly many economic commentators seem to think that a good dose of government spending and tax increases will restore our prosperity.

Well, no. Reflect on the fact that the federal budget never recovered from the global financial crisis. At best, the federal government was going to deliver a $5 billion surplus in 2019-20. That forecast surplus is now a $85.8 billion deficit. This financial year – before the second Victorian lockdown – the federal deficit is forecast to be $184.5 billion.

Nationwide the federal government estimates “effective unemployment” to be about 11 per cent.

Nationwide the federal government estimates “effective unemployment” to be about 11 per cent.Credit:Getty Images

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Economies are not about businesses, and unions, and shops, and goods and services. The economy is about people; their plans, their expectations, their relationships. For all the talk about competition, the economy is about co-operation. The economy is not a machine that can be switched off and on at will. The interrelated web of co-operative relationships that was the February 2020 economy is gone forever. The economy that now exists is a lot smaller than what it was just six months ago. The problem now being that we can’t be sure which part of it will revive and which part of it won’t.

What we can be sure of is that monetary and fiscal policy will play a small role in recovery – perhaps no role. The RBA has been trying to ignite “animal spirits” with low interest rates for a decade. The government has already borrowed so much money that our grandchildren will be paying it off. Not that I’m being overly critical – that spending was necessary to maintain the fabric of our society. The point being that we have already spent a lot of money just to stall the economy.

I do not want to suggest that debt and deficit don’t matter – that somehow the RBA could just print money to finance our spending. Modern Monetary Theory is to economics what hydroxychloroquine is to COVID treatment.

Warren Hogan of University of Technology Sydney has suggested that two decades of sustained economic growth will be necessary to pay off the debt. I agree.

We are going to have to work our way back to prosperity. Job creation is going to have to be the number-one policy objective for the next generation. Not make-work job creation that government excels at, but rather private sector jobs. Not more road building projects, but rather private sector entrepreneurship and innovation. That means trade and open borders. There is going to be a lot more technology use, too.

Serious microeconomic reform is needed. Australia has done it before. We could have been a banana republic.

There is no excuse why Australia cannot be a wealthy and prosperous nation. Healthy, kind and caring too.

We have also become used to the trappings of prosperity. We are going to have to give up some luxuries. Like the massive regulatory state that has evolved over the past generation. We can no longer afford to have government agencies suing companies on a whim. Or have competition authorities making the world safe for incumbents. To be fair, government has already undertaken some deregulation and instituted some tax cuts, even repaid taxes.

That is a good start. Going forward cutting more taxes, cutting red tape, green tape, and beige tape will be a priority. Getting people into jobs and keeping them in jobs will secure our prosperity.

Sinclair Davidson is professor of institutional economics at RMIT University.

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Fresh pandemic surge has dented US economic recovery: Fed chief


Powell said that the upcoming jobs reports and other surveys will help flesh out the Fed’s economic outlook, cautioning that he did not “want to get ahead of where the data are on this.” But as he has for months, Powell again emphasised that the economy’s recovery depends on the country’s ability to keep the virus in check.

“The path of the economy is going to depend, to a very high extent, on the course of the virus and on the measures we take to keep it in check,” Powell said. “The two things are not in conflict. Social distancing measures and a fast reopening of the economy actually go together. They’re not in competition with each other.”

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As expected, the Fed’s policymaking board decided to keep interest rates, which are already near zero, unchanged as it concluded two days of policy meetings this week.

The Federal Reserve signalled in its statement on Wednesday that the Fed would continue to use “its full range of tools” to steer the economy out of recession, even as the virus significantly shapes the future of the economy.

“The ongoing public health crisis will weigh heavily on economic activity, employment, and inflation in the near term, and poses considerable risks to the economic outlook over the medium term,” the Fed’s top panel of policymakers said in a statement at the conclusion of two days of meetings.

After sharp declines, economic activity and employment “have picked up somewhat in recent months,” the Fed said. Economists have been closely watching July indicators, which could help explain whether the recovery from earlier this summer is beginning to fizzle as some states and cities reimpose restrictions on businesses to combat rising coronavirus cases.

The path of the economy is going to depend, to a very high extent, on the course of the virus and on the measures we take to keep it in check.

Fed chair Jerome Powell

“Overall financial conditions have improved in recent months, in part reflecting policy measures to support the economy and the flow of credit to US households and businesses,” the Fed statement read.

To support the flow of credit to households and businesses, the Fed pledged to increase its holdings of Treasury securities and agency residential and commercial mortgage-backed securities at least at the current pace over the coming months. The Fed has said that its support of the markets should remain in place to help safeguard the broader financial system during the pandemic.

At his press conference, Powell said that the Fed was committed to keeping its lending facilities and other emergency measures in place not only during the shutdown and reopening, but also through the “long tail where a large number of people are struggling to get back to work.”

“We’re in this until we’re well through it,” Powell said.

For months, Powell has insisted that the virus will dictate an economic turnaround, which he says can’t happen until Americans feel safe going about their daily routines. Since the Fed’s last meeting in June, rising case counts have forced states to reimpose restrictions on business activity. Minutes from the Fed’s June meeting showed officials were worried that the United States could enter a much worse recession later this year if the pandemic is not contained.

Powell’s news conference comes as Congress clashes over another stimulus bill and an extension for enhanced unemployment benefits. On Monday, President Trump brushed off the new $US1 trillion Senate GOP coronavirus legislation as “sort of semi-irrelevant.”

Powell has repeatedly said that the Fed cannot heal the economy alone and that more help will be needed from Congress to ease the pain for millions of Americans and their businesses. But he has stopped short of telling lawmakers exactly what they should do or how urgently they should act, saying it isn’t his role to tell other parts of government how to do their jobs.

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At this week’s Fed meeting, Fed leaders were expected to discuss other policy tools, like forward guidance and asset purchases, without necessarily coming away with any firm conclusions. Economists are also awaiting the release of the Fed’s long-term monetary policy review, which could change the way the Fed approaches its inflation target.

Washington Post

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ASX to open lower as investors brace for a grim week of economic data


There will be little help from overseas markets at Monday’s ASX open after jitters sent Wall Street stocks deep into the red on Friday.

The S&P 500 and the Dow Jones each snapped a three-week streak of gains, while the tech-heavy NASDAQ had its worst week in four.

Second-quarter CPI will be the local centrepiece in another crucial week of economic data, but Burman Investments portfolio manager Julia Lee warned to keep an eye out for more virus-afflicted company news.

Dour updates from shopping mall owner Vicinity Centres and insurance giant IAG capped a turbulent week for local companies that also included pandemic-related impairments for the likes of QBE, Coca-Cola Amatil, and Santos.

Ms Lee said it could be a taste of things to come as companies look to get on the front foot for earnings season.

“(Companies) that get in early to report is a sign that they’ve already let the skeletons out of the closet,” Ms Lee said. “It’s the stragglers you have to worry about.”

Releasing earnings updates this week are mining giant Rio Tinto, Janus Henderson Group, CIMIC, GUD, CreditCrop, and Emeco Holdings.

Macquarie Group will hold its annual general meeting on Thursday, while auto dealer AP Eagers and Australian Agricultural Co will also front shareholders.

“The AGMs will be quite interesting this year,” Ms Lee said. “It will be interesting to see if we get more participation as people can’t physically be there, but can join via video, and whether the tone of the meetings is different.”

Commonwealth Bank’s economics team says government-imposed coronavirus shutdowns and support policies could result in a record quarterly decline for headline inflation on Thursday.

Consensus expectations are for a 2 per cent quarterly decline, which would be the biggest quarterly fall on ABS records, and for year-through inflation to turn negative for the first time since 1997 at -0.4 per cent.

“Free child care services … changes in the rental property market which have caused rents to fall, and the plunge in petrol prices by 20 per cent are driving the historic outcome,” CBA said. “Disinflationary pressure is likely to persist over the next year given the huge relative shock to the economy.”

In the US, NAB says the focus will be on a follow-up fiscal package, given a renewed weakening in the country’s labour market.

The US Federal Reserve will meet on Wednesday and second-quarter GDP figures will be released on Thursday. The world’s largest economy is expected to contract by 34 per cent on an annualised basis, after the first quarter’s 5 per cent drop.

There will also be key earnings reports from the US tech sector – including Facebook on Wednesday, and Alphabet, Amazon and Apple on Thursday.

The Eurozone’s second-quarter GDP figures are also due.

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Jobs news should strengthen consensus on economic stimulus


The bottom line is that even after the end of lockdowns in all states there were still about 660,000 fewer people employed than in February and total hours worked were still about 7 per cent lower.

Treasurer Josh Frydenberg said this week that in effect the unemployment rate is more than 13 per cent.

The new outbreaks of COVID-19 are almost certain to delay any recovery not just in Victoria and NSW but across Australia.

The anxiety, lockdowns and border closures will damage winter holiday tourism and consumer confidence in other states.

In fact, many employers who have held tight for four months are only now retrenching staff as they see little sign of improvement. The University of NSW said this week that it was cutting 500 jobs.

The good news is that the government has realised it is still far too soon to take away the economic safety net it extended in March.

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It has announced previously stimulus measures for home building and the arts, and on Thursday a $2 billion boost for training and apprenticeships was revealed. Mr Frydenberg has promised to announce a much more significant “second phase of income support” in an economic statement on July 23.

He says it will be targeted, temporary and a modified version of the JobKeeper and JobSeeker programs announced in March, which were originally supposed to expire in September.

For his part, Opposition Leader Anthony Albanese has promised to take a constructive approach to the package on certain conditions.

Mr Albanese says he accepts the need to taper income support and perhaps reduce the very generous rate of JobKeeper for casual workers.

He wants any reductions to the benefits to take effect in stages as the unemployment rate falls.

“If you withdraw support too early you’ll end up with a recession that is deeper than it needed to be and goes for longer than it needed to go,” Mr Albanese said this week.

It is positive that both sides of politics are at least within cooee of each other on fundamental economic policy. The Coalition has accepted the need for more stimulus while the ALP has accepted the need to slowly cut back expenditure.

There will be plenty to dispute next week, as both parties haggle over the timeline of any reduction and the baseline income of future unemployment benefits.

The Age would argue that in addition to temporary income support the government should increase investment in productivity-enhancing infrastructure and training.

With the pandemic dragging on, all sides need to come together to craft a package that supports the economy and protects the most vulnerable while spending cash in the most efficient way.

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Cheap money not enough to cure our economic ills


The answer is that although few people were willing to commit to a new mortgage during the lock-down period of May, hordes of people who already had loans, perhaps feeling nervous, rushed to switch banks as lenders slashed their fixed rates to as low as 2.19 per cent.

That refinancing bonanza is in part a result of the Reserve Bank of Australia’s extraordinary effort to drive down the cost of borrowing in March, through the cash rate cut and a range of other “unconventional” measures. While housing is not the economy, of course, it is an important channel through which lower borrowing costs flow into the economy.

This week’s wave of refinancing demonstrates that cheaper credit is indeed flowing: home owners are saving on interest as a result of cut-price interest rates, allowing them to spend more, or pay off debt more quickly.

However, the weakness in new mortgage lending also illustrates how rate cuts alone can’t offset the far bigger problems hanging over the economy, such as job uncertainty. And that reflects a wider limitation of slashing interest rates to support an economy: the RBA can free up household cash flow, but cannot make people lift their spending (or force businesses to invest). And that’s really what the economy needs right now: demand.

Which is why economists are so keen to see Treasurer Josh Frydenberg use the federal budget to support the economy in its hour of need when he delivers a key update in just under two weeks.

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First, however, back to all the cheap money that’s sloshing around the financial system and finding its way into household bank accounts. The surge in mortgage refinancing activity is a tangible illustration of how the RBA’s foray into “unconventional” monetary policy has flowed into the “real” economy of household budgets.

As a refresher, back in March the RBA not only cut official interest rates to 0.25 per cent but also unveiled measures to force down bond yields and give banks up to $90 billion in loans at an interest rate of 0.25 per cent. Banks have also been awash with deposits in recent months as nervous households ploughed $40 billion into their bank accounts, and super funds held cash on hand to prepare for emergency withdrawals.

As explained by deputy governor Guy Debelle in a speech last week, the overall effect of the RBA’s various measures has been to bring down the cost of funding for the banking system. The fall in funding costs has been greater than the 0.25 percentage point in the cash rate announced in March. The bank bill swap rate – a gauge of the cost of banks lending to each other – has fallen to just 0.1 per cent.

What are banks doing with the windfall from cheaper funding? Some of it might support their profit margins, but it appears a lot is being passed on to borrowers in the form of low interest rates for new customers, or those who haggle or refinance.

This is reflected in RBA figures that show the average rates on new home loans continuing to fall in recent months to 2.73 per cent and 4 per cent for small business. One small Tasmanian bank is even offering fixed rate mortgages at interest rates of less than 2 per cent.

Given the extent of the economic hit from COVID-19, financial markets are betting that extremely low interest rates are probably here to stay for years to come.

As governor Philip Lowe said after this week’s board meeting, the cash rate will not increase until there is progress being made towards full employment and inflation running sustainably within its 2 per cent to 3 per cent target band. Debelle in his speech said this was “likely to be some years away”.

The challenge, however, is that with a cash rate of just 0.25 per cent, monetary policy is getting closer to the limits of what it can be expected to achieve. The RBA hasn’t exhausted all its options, as a quick look around the world of central banking reveals. Some believe the RBA may act to try to bring down the Australian dollar if it climbs too much higher, and there’s always negative interest rates (though Lowe has said this is “extraordinarily unlikely”.)

But the interest rates lever has been well and truly pulled. The financial system has a huge amount of funding at its disposal, at very low cost, but what the economy needs is stronger demand. Given the uncertainty about future employment and the real worry of a second wave, economists say this requires an ongoing role for the other big arm of economic management: fiscal policy.

Frydenberg has made it clear there will be some further fiscal support in his upcoming economic statement, which might include JobKeeper being extended in some way, or tax cuts being brought forward. With the government’s surplus ambitions long ago blown out of the water, it’s time for fiscal policy to step up to the plate.

Ross Gittins is on leave.

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Australian News

Banks give customers more time to pay off loans amid economic crisis


Banks have eased the burden on Australian families struggling amid the coronavirus-induced financial crisis and softened the looming shock to the economy by extending the home loan holiday by another four months.

The property sector was bracing for sharp falls in housing prices in September when the deferrals offered to borrowers was to expire alongside the Morrison Government’s JobKeeper and JobSeeker support schemes.

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The lifeline from the lenders comes at a critical stage as Victoria is forced back into a six-week lockdown from midnight as coronavirus cases in the heavily populated state continue to soar.

It also follows a grim survey from the ANU which revealed the number of Australians unable to pay their rent or mortgage on time more than doubled as a result of the pandemic.

The banking industry’s peak body described the “next phase” as an opportunity for those whose incomes are still impacted to return to repaying their mortgages through a restructured or varied loan.

If this is insufficient in getting customers back on their feet by the time the initial six-month deferral expires, borrowers will be offered an extra four-month home loan holiday.

“Those who are able to repay their loans will resume doing so, which is in the best interests of those customers and allows support to be directed to those who need it,” the Australian Banking Association chief executive Anna Bligh said.

“Encouragingly, many customers have already chosen to resume making repayments.”

The deferral extension from September through Christmas won’t be offered automatically. It will be provided to those who genuinely need extra time and further support, the ABA says.

Some may have their mortgages back on track within the four months allocated.

The Commonwealth Bank said it had launched a three-month check-in with its affected customers about their financial positions and found many of its retail and business borrowers have resumed paying loans in full.

But some still need targeted support to help get back on their feet.

“While many customers are doing better than we expected, we know that some customers will require further support and we will contact them over the coming months to discuss the options that might be available to them,” CBA chief executive Matt Comyn said.

“To date, our coronavirus measures since March 2020 have provided about $15 billion in direct financial support to customers and stimulus for the economy.

“Supporting customers who continue to experience financial difficulty is a priority and we are tailoring our support to make sure each customer gets the advice and assistance that suits them.”

The Federal Government has been criticised for not extending the wage support schemes beyond the September cut-off but Treasurer Josh Frydenberg told Channel 7’s Sunrise program this morning that “targeted” income support will be announced in his July 23 economic statement.

He told The Australian that Victoria entering its second lockdown will cost the economy about $1 billion a week.

“When I made a statement to the parliament in May I talked about the economic cost of a lockdown being about $4 billion dollars a week, and given that Victoria is about a quarter of the national economy, then you’re talking about an impact of around a billion dollars a week for the Victorian economy alone, which is very significant,” the Treasurer said.



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