Daily Commentary BY THE CURVE TEAM –

Retail Spending Economy’s Saving Grace

23th of July, 2020

Today the Government is set to announce the biggest budget deficit and recession since WWII however there remains one shining light in the economy.

Reports out in the press this morning indicate that today’s scheduled release by the Treasurer will see a blowout in the budget deficit to around $180bn. Falls in company tax receipts on the back of Covid-19 lockdown measures of around 12bn for the fiscal year combined with large increase in expenditure for social security are undoubtedly the cause.

There does remain one positive for the economy amidst all these headwinds. High frequency retail sales data out yesterday showed consumers in June were more active with spending 2.4% higher than May . Within the data release, spending on cafes, restaurants and takeaway was up over 20% which should pose a strong positive for employment in the hard hit hospitality sector.

Looking forward whilst spending as a whole is appearing to show a bounce this is not across all areas. Additionally, the lift in spending is likely heavily influenced by Jobkeeper/Jobseeker recipients spending their social payments. Whilst the fact these people are spending is of itself is not a bad thing, that is the exact purpose of the payment. With the government having recently announced the significant reductions in these payments after September the ability for this level of consumption to be sustained may come under pressure.

On the calendar, in conjunction with the announcement by the Treasurer we will also see release of the quarterly NAB business survey at 11:30.

Matthew Dunshea

Client Relationship Manager