Posted: 07 Apr. 2020 5 min. read

Different times, different measures

Weekly economic briefing

COVID-19 is affecting our economy and way of life – with considerable speed and impact. Policy makers need to be finely attuned to these developments, but that’s no easy task, in part because good policy is informed by good data. However, in the current crisis, many traditional data sources lack the timeliness to provide real-time insights.

As an example, the first official insight into the Australian labour market that we’ll receive won’t be released until later this month, three weeks after the period it’s measuring. And it won’t give a full picture of labour market impacts in March because this release will only cover the first two weeks of March.

What are the real time and leading indicators telling us?

  • In the US, an additional 10 million people filed initial jobless claims in the last two weeks, which will be enough to push unemployment there upwards of 10%. That dwarfs the 3.5% unemployment rate in February and 4.4% rate in (early) March.
  • Purchasing Manager Indexes (PMI) are forward-looking indicators meant to signal the direction of economic activity as they track the sentiment of purchasing managers. The global services PMI fell sharply from 47.1 in February to 37.0 in March. The PMI for consumer-related services fell much more than the PMIs for business services or financial services, reflecting the shutdown of many consumer-facing industries, including restaurants, hotels, retail stores, and entertainment venues.
  • Australia mirrored the global fall, with the Australian services PMI falling from 49.0 in February to 38.5 in March.
  • Further, Google searches for Centrelink, JobSeeker and JobKeeper have grown rapidly in Australia over the past three weeks, as displaced workers register for welfare payments and income support.
  • Following the announcement of JobKeeper, the ANZ-Roy Morgan Consumer Confidence Index rebounded 10% last week. However, that followed a 35% fall in sentiment over the previous two weeks, to what was its lowest level since the inception of this survey in 1973.
  • Google Mobility data has shown a 45% decrease in foot traffic around Australian retail and recreation outlets in March, while grocery and pharmacy foot traffic fell 19% over the same period.
  • EFTPOS transaction data from ANZ shows a significant shift in consumer spending habits. Spending on clothing had fallen by 40% through to the end of March compared to the same period last year, while grocery and pharmacy shopping saw weekly gains of 80% in mid-March, but had moderated to a 40% annual gain by the end of March (suggesting that consumer stockpiles might be levelling out). 
  • Deloitte Private’s survey of key clients found that 80% of private business leaders believe that their response plan is proactive in the current landscape. That said, 44% of private business leaders flagged cash flow/revenue as their single biggest concern right now, while staffing/HR/redundancy matters resonated as the biggest concern for 25% of private businesses.

These early indicators are providing evidence around the scale of the COVID-19 crisis, and the policy response to support the economy has ramped up quickly to match. The first Federal response cost $17 billion, the second round another $66 billion, and then the third is budgeted for up to $130 billion. There has been some concern about the cost of these policies, but as Deloitte Access Economics partner Chris Richardson explains, it shouldn’t be something to fear. 

“Although the dollars are unprecedented, what’s even more unprecedented are the interest rates we’ll be paying on this new debt. Never in the two thousand years of recorded history of interest rates has it been cheaper for governments to borrow. Never. And markets aren’t fazed in the slightest: they reacted to the latest package by dropping the rate on 10-year Commonwealth borrowing substantially further.

“There are lots of things to be scared of. The fight for our health is a long way from being won.

“But don’t be scared of the debt – its costs aren’t that bad. And chances are that taking on this debt will be a great investment in Australian livelihoods.”

An analysis of the implications of Federal government spending announcements on debt levels and repayments can be found in Who’s afraid of the big bad debt?

More about the author

David Rumbens

David Rumbens

Partner, Deloitte Access Economics

David is a macro economist with extensive experience in applied economic and quantitative analysis of the Australian economy, along with considerable experience in labor market analysis.  David is a regular commentator on macroeconomic trends, and prepares a weekly economic briefing newsletter.