Australias Relative Success in Virus Control Means Recession Downturn Not as Deep

A prominent economist believes Australias relative success in protecting lives during the pandemic is why the nations first recession since the early 1990s is not as deep as other economies.

“Thats not rocket science,” Deloitte Access Economics partner Chris Richardson told the National Press Club in Canberra on Sept. 9.

“If people are scared, if families are scared, if businesses are scared, theyre not spending as much and the damage to economies is deeper.”

It could be why Australians suddenly appear to have a spring back in their step after suffering the doom and gloom of the pandemic.

New figures show consumer confidence has soared despite confirmation of a recession last week.

At the same time, people were taking on a home loan at a record pace, albeit prior to Victoria going into a harsh lockdown.

Australian Bureau of Statistics figures show the value of new loans for owner-occupied housing jumped 10.7 percent in July, the largest month-on-month in history.

First-time home buyer loans also surged 14.4 percent.

The bureau put this strong demand for credit down to the easing of COVID-19 social distancing restrictions in most states and territories.

But AMP senior economist Diana Mousina expects housing finance growth will likely slow over the next few months due to declining housing activity in Victoria.

“While owner-occupied housing is back to its pre-COVID levels, investor lending is still well below its levels earlier this year, which is also in line with the big fall in rents and higher vacancy rates which dent investor housing returns,” she said.

Meanwhile, the monthly Westpac-Melbourne Institute consumer sentiment index roared back by 18 percent in September after dropping 9.5 percent in August.

This recovery came despite confirmation last week the nation is in recession for the first time since 1992.

“Clearly this was old news with respondents more focused on the future,” Westpac chief economist Bill Evans said.

He said the confidence fall in August was in reaction to the deteriorating virus situation in Victoria and the introduction to harsh lockdown measures in the state.

Adding to concern was the slump in NSW.

“We suspected last months 9.5 percent collapse in the index was an overreaction, but this months 18 percent rebound is a pleasant surprise nonetheless,” Evans said.

However, the September survey was completed before last weekends announcement by Premier Daniel Andrews of a very gradual reopening of the Victorian economy, possibly extending to November.

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