Over the course of the last 12 or so weeks, we have all been reading the stories about how precarious the position of the Australian economy is thanks to the summer bushfires and then the Covid-19 shut down.
But over the last couple of weeks, there are some great signs for our economy.
In a nutshell, here are just a few of the reasons that businesses should be looking forward to better times, and investing in their reinvention or just marketing hard to let their customers know they are open and ready to provide them with their services.
1. Easing of Restrictions
Over the last few weeks, we have seen most states and territories beginning to significantly ease restrictions. This in turn has allowed many businesses to reopen, and we have been able to start to return to our favourite coffee shops, restaurants and pubs. In some states, it goes even further then that. For those of us in Queensland for example, we are now able to travel throughout the entire state just in time to book our ideal winter school holidays get away. Reports already coming in are that Hotels and Resorts across the state are experiencing excellent booking levels. The same is occurring in NSW and undoubtedly across other states. Seemingly, the desire to travel is still there for Aussies. The beautiful part – the money that is spent will stay on shore and help our tourism operators and local restaurants, cafes, pubs and hotels. Last year, Australian’s spent $52 billion overseas. Seeing much of that getting spent here will create great stability for the sector. Great news that is sure to drive some much needed revenues across coming weeks and months.
2. Australian Dollar
Since mid-March, the Aussie dollar has surged from its lowest level in two decades of US$0.551, to US$0.681 as at 8am on 03/06/20. A staggering climb of 24 percent. This isn’t driven by the unrest currently in the US. It is created through the Reserve Bank keeping our interest rates on hold at 0.25% – higher then the USA, Britain, The EU and Japan. It is also aided by significant demand for our iron ore which we sell in Australian Dollars – when demand on Aussie iron ore increases, the demand for Australian dollars generally tends to follow. A strong Aussie dollar ensures we are in a strong position to be able to maintain our costs on essential imported items such as Petrol, Diesel, Medical supplies and Anti-Biotics which are particularly important for a stable economy.
3. Iron ore price bonanza
One of the key positives with China already being in recovery mode from Covid-19, is they are looking as a Government, to stimulate their own economy through industrial production. To do this, they need our iron ore. Even more so currently, given their other main suppliers in Brazil are experiencing severe supply disruptions due to Covid-19 and civil unrest. The lack of supply out of Brazil means that as of 8am on 03/06/20, the iron ore price has smashed through the US$100 a tonne barrier – close to its all-time high! Given that iron-ore accounted for 16 percent of Australian Exports in F2019, a surge in demand is a wonderful thing to help drive our economy and create employment. Remember, a strong mining sector doesn’t only create mining jobs – it creates jobs across the entire economy.
4. $25,000 Government Home Buyer Package
Details on this are still being finalised, however, we all know that a strong construction industry means a strong economy. By helping to ensure that our tradies are working hard to build new homes and undertake major renovations on existing ones, it helps ensure the stability of their jobs and unemployment in general. When more people keep their jobs, the property market stays stronger and this creates less pressure on all people with mortgages whilst driving certainty about the ability to be able to spend in the economy, rather than feeling the need save and pay down more of the mortgage to ensure you are safe against banks calling in loan differentials. The economy needs us all spending to get through this. All measures created that allow this to occur are major positives.
There is an increased amount of optimism from investors at present – I should say however, that this is relative to the darkest days of March and April. However, optimism is driving gains across a number of futures markets.
The above is just a snap shot of recent news on the Australian economy.
There is obviously still a lot of water to go under the bridge in terms of the “Covid-Economy”. However, these positive signs give great reason for optimism and hope that all of us in business are looking for.
Now the question is – “Who’s up for the next fight? Which of us are prepared to get behind our businesses and invest in taking them forward and maximising the opportunities that exist over the coming weeks and months?”
Feel free to email us or call on 1300 65 85 00 to talk about how to take the next step forward.