Twin disasters bringing uncertainty to economic outlook
The Reserve Bank of Australia's first meeting of the year has delivered the widely-expected result of our cash rate being kept on hold at 0.75 per cent. Word on the street however, is that we'll see another cut by May as the impact of coronavirus and bushfires flows through to jobs and wage growth.
Coronavirus is already causing significant trouble for travel and tourism businesses. This has always been a sector highly susceptible to economic highs and lows; listed businesses relying on travellers were among the biggest losers when the ASX lost A$28 billion across Monday's session. Australia is certainly not alone in that regard - the US economy is expected to lose A$15 billion from the drop in Chinese visitors - but given this country's economic reliance on China, we'll likely feel the hurt keenly.
We're entering the February earnings reporting season, and the events of the summer will have impacted quarterly performance almost across the board. Some analysts were predicting on Monday that this would give cause for the RBA to cut rates this month; they were wrong this time around, but who knows what March will bring?
The RBA has much more than the state of the financial markets to consider, of course. Look at what's happening in the residential property space, with price inflation continuing unabated. Capital city auctions reported strong showings over the weekend, and buyers are apparently pushing themselves hard to compete. Little wonder that new home approval figures for December show that the agonising decline in this sector appears to be slowing.
In the midst of all this, HR recruitment mob Adecco Group released a study over the weekend showing the industries most likely to get a pay rise this year. It had surveyed 3,000+ employers on their intentions to give people a bump in 2020; you'd have to wonder though, if this study was conducted earlier than January 2020, how reliable this guide could be? Deloitte Access Economics is one economy-watcher that thinks Adecco's findings don't hold water; its latest Business Outlook statement says 2020 won't be a year for pay hikes.
Earlier this week, the Morrison government was warning that the Australian economy is likely to take a hit, and could go backwards over the next quarter. Given how resolutely upbeat it has been since resuming government in 2019, even in the face of overwhelming evidence to the contrary, this should be taken seriously.