Daily Commentary BY THE CURVE TEAM –

Government Takes Centre Stage

July 20, 2020

As virus case numbers increase and the JobKeeper and JobSeeker deadline looms, whether the government decides to impose further lockdown measures and maintain welfare benefits will be monitored closely this week.

The latest update for Covid-19 cases in Australia saw 363 new cases in Victoria and 18 new cases in NSW. With parts of Victoria, notably the Melbourne CBD in lockdown, the threat of harder lockdowns in NSW looms.

The NSW government have indicated they will avoid widespread lockdowns, preferring to lockdown regions with known outbreaks. Nonetheless, the uncertainty of where the virus will spread, how quickly it will spread and whether lockdowns will be imposed in certain regions will hurt business and consumer confidence.

Reports are also suggesting that the federal government will retain the JobSeeker and JobKeeper programmes beyond the September deadline but with adjustments. Differentiating between sectors, ensuring businesses are not accessing the funds erroneously and lowering the payments so people aren’t being paid more than before Covid-19 will be at the fore of the adjustments.

On Thursday Treasurer Frydenberg will confirm the adjustments to the wage subsidies. Adjustments to make accessing the payments more stringent and any lowering of payments is expected to be supported by the Australian Council of Trade Unions, which means Labour will almost certainly support it.

Any unwinding of the wage subsidies will be a hit to incomes, which again will have ramifications for confidence and spending.

On Tuesday, RBA Governor Lowe will speak on the same day the RBA minutes for July are released. The minutes are not expected to pose anything new with the interest rate at 0.25% indefinitely, but one of the topics Lowe will speak about is government balance sheets. Lowe’s speech at the Anika Foundation could foreshadow the stance Frydenberg takes on Thursday.

Josh Stewart

Client Relationship Manager