Daily Commentary BY THE CURVE TEAM –

RBA Declares Recession Over

28th of October, 2020

Ahead of the RBA’s economic forecasts released next week, Deputy Governor Guy Debelle declared that the economy is out of recession.

The announcement came at the Senate estimates hearing. Debelle said the September quarter will show positive growth after two quarters of consecutive falls, including a 7% fall last quarter.

Victoria’s GDP is expected to decline 2% for the quarter, but this will be offset by gains in other states. Uncertainty in forecasts though is extremely high and will continue to be.

Optimism for GDP forecasts beyond September has grown as Victoria eases lockdowns. But any setback with the virus would lead to a re assessment of forecasts.

Europe is undergoing just that. Germany case numbers are approaching 20 000 a day, which could prompt stricter lockdown measures. In France, record numbers continue to be recorded, which has President Macron preparing stricter lockdown measures.

Similarly, in the US, some states are considering tightening their lockdown measures as they are overwhelmed with case numbers. The rising case numbers around the world has weighed on equity markets in Europe and the US.

For Australia, the rising case numbers around the world will continue to limit our exports and will lessen the chance of borders re-opening. It could also lead to overseas central banks to ease their policies further, which will put more pressure on the RBA to follow suit.

CPI data for Q3 will be released today. An increase is expected off the back of childcare subsidies being unwound and rising oil prices.

Josh Stewart

Associate- Money Markets