Monthly Insights BY THE CURVE TEAM –

With over 100 years of collective financial markets experience behind us, we have created Curve’s monthly insights, highlighting important global economic data and providing in-depth analysis to help you better understand the current economic climate.

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Economic Resurgence Underway

  • Three different vaccines for Covid-19 showed very encouraging results, which means Australia will likely begin rolling out vaccines from the beginning of next year.
  • GDP for Q3 and employment data for October were very strong.
  • Victoria’s re-opening continues to offer an immediate upside to the economy.
  • The RBA made no change to monetary policy and continue referring to an uneven and drawn-out recovery

Economic Recovery Hinges on Consumption

  • As was widely expected the RBA pulled multiple levers at the November meeting to ease overall monetary conditions.
  • The actions from the RBA has flattened the yield curve but has failed to have an impact on the currency.
  • In their Quarterly Statement on Monetary Policy the RBA upgraded their near-term outlook but remains concerned about the medium term.
  • Their forecasts hinge on consumer behaviour and hope that consumers will ramp up spending as the economy re-opens.

Lingering Uncertainty A Threat to the Recovery

  • The government finally delivered a budget update full of incentives but light on spending.
  • More monetary policy is expected to compliment the latest fiscal policy announcements.
  • A lift in confidence from businesses and households is needed for the current monetary and fiscal settings to have their full effect.
  • However there are a number of uncertainties that pose a significant threat to the outlook and the recovery that is expected to be “bumpy and uneven”.

Recession Confirmed as Household Consumption Collapses

  • After a world record run of almost 30 years of uninterrupted growth, Australia is now officially in a recession.
  • There was one sector of the economy that accounted for almost the entire decline in growth over the quarter.
  • That same sector also holds the key to the outlook.
  • This month also saw the first change to monetary policy settings since the RBA’s emergency board meeting back in the middle of March this year.

RBA’s Outlook Highlights Harsh Reality

  • Hopes of a swift recovery from the Covid-19 pandemic are slipping away based on the latest update from the RBA .
  • The second wave of the virus in Victoria is only part of the problem with the scars of the current crisis to be with us for some time.
  • Risks are still skewed to the downside with the RBA’s baseline scenario still looking too optimistic.
  • Despite the current settings of monetary policy remaining unchanged, the RBA is buying government bonds again amid calls for further policy support.

Second Wave Threatens Outlook

  • Australia’s early success in containing the virus is slowly coming undone as community transitions in Victoria start to spread.
  • The RBA remains committed to doing all it can to support the economy and ensure that the price and availability of credit will support any recovery.
  • However, with little room left to have a meaningful impact and its measures still under-utilised, pressure is mounting on the government to steer the economy through the crisis.
  • With the spread of the virus gaining pace and crossing into NSW and Queensland, the outlook for the economy is at the crossroads and the next few weeks will be crucial.