Daily Commentary BY THE CURVE TEAM –

Retail Sales Boon to Economy

6th of July, 2020

Data released on retail sales for May suggests government measures have had there intended effect.

As lockdowns unwound across the country in May, retail sales rose 16.9% for the month after falling 17.7% in April. The May data and the panic buying in March has left retail spending 5.8% higher year on year.

Government measures, including $750 a week payments for the JobKeeper and JobSeeker as well as allowing superannuation to be drawn down has undoubtedly influenced these figures. Some 3 million people are currently on JobSeeker payments and by $17 billion has been taken from superannuation by over 2.4 million people, with a second drawdown now available.

Without these measures, spending would likely have struggled to recover so quickly. The measures though are intended as short run solutions. Whether incomes can be raised over the long run without direct government support is becoming a key agenda for the government.

The election over the weekend should provide some vindication for the government to implement more bolder changes than they otherwise would have. The By-election in the southern NSW seat of Eden-Monaro was the first true test of the government at the polls since the Covid Crisis began.

In what was already a very marginal seat labor appear to have clung to victory maintaining a very similar margin to the last federal election. Whilst that would appear a negative for the government, historically speaking by-elections usually see a significant swing away from the government which did not occur.

For the economy to return to strength there will need to be significant economic policy reform. Contumacious issues like industrial relations polices and taxations will need to be considered, the positive for the government is that this small political win against labor may give them confidence to take more reformist action. Nevertheless for these types of policy to pass both houses we will undoubtable need cooperation from both sides of both houses, from the business sector and the unions.

This week we will hear from the RBA. With the cash rate indefinitely being held at 0.25%, the RBA’s commentary on the economic recovery will be of most interest to the market and the public.

Josh Stewart

Client Relationship Manager