This week there was very little change in real estate activity. Sales decreased from 855 to 803, listings remained basically the same along with rental listings.
The latest Westpac-Melbourne Institute consumer sentiment survey for August showed consumer confidence fell by 9.5%. Westpac’s economists said the size of the fall was a “major surprise”. The good news for the WA economy was consumer confidence decreased slightly by 1.5% while confidence fell by 8.4% in Victoria, which would be anticipated being back in lockdown. Surprisingly the biggest fall in confidence was in NSW, which fell by 15.5%, Queensland by 8.1% and SA 5.8%. This is comparatively good news for the WA retail industry and economy.
Last week we briefly looked at the potentially different effects of the interstate and overseas travel restrictions comparing Victoria and WA’s population growth. Employment, interest rates and population growth are widely accepted as the three biggest drivers of property prices.
This week the RBA released their Quarterly Statement of Monetary Policy and it contained some interesting data and graphs showing the impact to population mobility in Australia and overseas due to restrictions and the easing of those restrictions. The graph below shows the countries that introduced the hardest lockdowns and the greatest restrictions on population movement are now in similar positions as countries that had more relaxed restrictions with respect to population mobility.
But if we look at the next graph showing new cases, the countries that were able to introduce the toughest restrictions are now recording the fewest new cases.
There is some conflict about the trade-off between stricter lock downs with improved health outcomes and negative economic outcomes. The belief has been that countries with the best health outcomes will be able to lift restrictions earlier and return to positive GDP growth earlier. There are some examples where it may not be that simple.
If we compare two of the larger global economies, the USA and the UK, we can see from the bottom right corner of the Population mobility graph the UK enforced much stricter lockdowns than the USA. As a result new cases for the USA has increased dramatically while the UK, counted as part of Western Europe in the New Cases graph has remained comparatively very low. However the UK just recorded the largest decline in GDP for the June quarter of all major economies. The fall of 20.5% is staggering to say the least while the USA recorded a 9.5% fall. In just under a month we will have Australia’s June quarter GDP figures.
Obviously the coronavirus and its impact on Australia’s and the global economy was the main talking point from the Statement. The RBA said the contraction over the last 6 months was smaller than predicted 3 months ago which was positive but the recovery would now be slower than forecast. As we watch Victoria in lockdown and New Zealand start recording new cases of coronavirus along with increasing cases in some other countries there will be very little chance of a global V shaped recovery. (A V shaped recovery means a quick contraction followed by a quick recovery). In reality, forget the forecasts, the actual global recovery is heavily dependent on a vaccine so we will watch with interest what happens in Russia as they roll out the first vaccination, Sputnik V, in two weeks.