Daily Commentary BY THE CURVE TEAM –

Threat and Opportunity for Recovery

16th of November, 2020

Over the weekend a threat to Australia’s economic recovery emerged as well as an opportunity.

South Australia recording cases of Covid-19 poses a downside risk to Australia’s economic recovery. So far 17 cases have been recorded from a known cluster.

It comes just as states have begun to ease border restrictions and Victoria emerges from their stringent lockdown. Case numbers will be monitored closely in South Australia, with the hope that they can be controlled so Australia can maintain its path to recovery.

Juxtaposed to this was the announcement of the Regional Comprehensive Economic Partnership (RCEP) being signed yesterday. This is a trade agreement involving 15 Asian countries, ranging from richer countries such as Australia, Japan and New Zealand to poorer countries such as Vietnam and Thailand.

Significantly, China are part of the agreement, which should assist in countering the recent trade tension between Australia and China. The RCEP merges many bilateral and multilateral trade agreements that currently exist.

The key features of the agreement are eliminating 90% of existing tariffs over 20 years and an expected $186 billion (US dollars) increase in GDP by 2030. It is limited in scope though, as it does not have any rules for state-owned businesses and still allows tariffs for certain industries that are considered politically sensitive. Nonetheless, at the very least the agreement is symbolic of the desire to co-operate more within the region.

It is a busy week for the economic calendar in Australia. Headlining the week is the release of the minutes for November’s board meeting on Tuesday, where a raft of changes to monetary policy were implemented.

RBA Governor Lowe delivers a speech tonight and features on a panel on Wednesday. Assistant Governor Chris Kent speaks tomorrow, and Deputy Governor Debelle appears on a panel on Wednesday.

Data releases this week are headlined by employment for October, which is out Thursday. There is also weekly jobs data on Tuesday, wage price data on Wednesday and preliminary retail sales on Friday.

Josh Stewart

Associate- Money Markets