The Wallet: Got an issue? Have a tissue.

Looking to sort fact from fiction? In lieu of a pill, this should help.

This week's headline could read "COVID-19: China Sneezes, World Catches Cold".


We here in the modest, yet cosy alcove that doubles as workspace for The Wallet (gee, that coal stove sure is toasty, Tiny Tim) have almost given up trying to sort they hyperbole from how it actually is when it comes to coronavirus. Then appeared Jill Margo's excellent article a couple of hours ago (why the panic could be worse than the pandemic; what a header!).


Jill cites the WHO's attempts to address what it called the "infodemic" - a social media-propogated tsunami of information making it hard to discern fact from fiction. To that, we should add popular media and even academia, as publishers scramble to attract audiences with ever-more-audacious headlines.


In an attempt to shut out the noise, we've tried to focus on what's actually happening and how it's impacting consumer behaviour. For example...


Markets


...are getting savaged all over the damn place, in reaction to the World Health Organisation's (WHO) advice that we've reached pandemic conditions. Which has prompted the predictable buy-the-dip calls - but investors are reluctant. The ASX has lost any gains it had made in 2020 and has been down five days in a row.


According to this guy, this was all going to happen anyway; COVID-19 is just the catalyst for what he says is a natural correction of misallocated capital in a late-cycle market. He's compared it to what happened with the dot com bubble (technology) and the GFC (housing)...this time, we're seeing the inevitable conclusion to over-investment in plumped-up corporations that are too reliant on debt and financial engineering, with not enough reinvestment of capital back into their businesses.


Australian Dollar


...has hit a decade-low. Globally, the Australian economy is seen as overly dependent on China; the currency has been treated accordingly.


Companies


Nearly every listed entity from automotive to wine has played the coronavirus card to explain poor half results this reporting season. Particular sectors are in genuine dire straits though; no prizes for guessing the following:


Tourism: hotels, airlines, airports and other tourism-reliant businesses are feeling the pain. The Tourism and Transport Forum (TTF) reckons Australia is going to lose 1.8 million visitors in the first half of 2020, and has estimated losses of $2 billion per month. It might be gilding the lily a wee bit, however; see below under economy.


Events: companies around the world are battening the hatches on business travel and corporate events, while many major sporting and other international gatherings are being cancelled at the moment. All eyes are on the Tokyo Olympics, scheduled to kick off on July 24.


Construction: housing, already suffering from the property downturn, is being held hostage to a disrupted material supply chain...but then again, so are many other sectors.


Economy


The Morrison government yesterday signaled that there probably won't be a surplus when it comes time to announce the next budget in May. Scott Morrison also ruled out stimulus measures, while also warning that the economic impact of coronavirus will be worse than the summer fires.


All told, Deloitte Access Economics has tallied up the likely damage and concluded that, provided the virus can be contained by July, Australia will take a $6 billion hit across the economy. (See what we mean re TTF's prediction?)


Consumer sentiment


...is still pretty crappy. What else can we say? Wages are stagnant, people are worried about their jobs, our world was burning a minute ago, and today it has the flu.


Not that this is really COVID-19's fault. Take APRA's mortgage credit figures for January, released today; despite that other fabulous font of glorious headlines, Sydney and Melbourne's property markets showing flourishing signs of recovery, overall mortgage lending continues to slow.


It is very interesting to see which lenders are gathering flocks right now. Macquarie and Suncorp, for example, are very popular with property investors (and NAB and Westpac really aren't), while CBA, Macquarie and NAB are the owner-occupier's best friends.


Another stat that will make our friends in residential property sales very happy is the slight, slight increase in lending to investors - although we wonder how much that has to do with rising property prices, as opposed to heralding an en-masse return.