Cutting through the noise – In the news

With so much misinformation out there, we have decided to do our best to share with you some of the better articles and data we have digested recently. Our goal is to help you ‘cut through the noise’ and provide snippets of the ‘light at the end of the tunnel’.

We constantly read, review and analyse articles, information and data relating to the economy, government policy, financial and property markets. Our aim is to  educate and empower you, our clients and readers, to make great property, mortgage and money decisions.

We will endeavor to increase the frequency of our updates, which is also supported by our weekly Property Planner, Buyer and Professor Podcast Covid-19 specials. We trust this helps to keep you well informed, whilst also saving you time deciding where to get information from.

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PM plans staggered virus exit
Australia’s economic recovery will be a series of “trials”, with some states moving faster than others in lifting COVID-19 shutdown restrictions and potentially gaining a competitive edge, Scott Morrison says.

The Prime Minister has also revealed that work is under way to better safeguard Australia’s “economic sovereignty” in the aftermath of the crisis.

This means a resurgence in local manufacturing, especially of critical goods such as medical equipment.

Mr Morrison said balancing Australia’s dependence on being an open trading nation against the need to safeguard its critical supplies was already being looked at. “Open trading has been a core part, a core part of our prosperity over centuries,” he said.

Coronavirus: Why Australia’s death rate is so low compared to other countries 
Australia is on the “global forefront” in terms of testing for the coronavirus, with more than 230,000 tests already carried out across the country.

There are now more than 4500 confirmed cases of the virus in Australia, with 19 people dying from the illness and 50 in intensive care.

Health Minister Greg Hunt said these figures show the virus is having a very different impact here compared to other countries, with the death rate being less than 1 per cent of confirmed cases.

Mesoblast scores virus breakthrough 
Australia is well known for its leadership in medical science thanks to the genius and determination of individuals working in a sector that consumes enormous amounts of development capital.

Mesoblast chief executive Silviu Itescu stands out among his peers for his long-term commitment to innovation in stem cell research. This paid off on Monday when the company said it had clearance from the US Food and Drug Administration (FDA) for an Investigational New Drug application to treat patients with acute respiratory distress syndrome (ARDS) caused by COVID-19.

Dow leaps 7.7pc, ASX to open higher
Australian shares are poised to extend their fast start to the week as overseas markets rallied on signs that the virus may have or may be near a peak in Italy and Spain, as well as in New York city.

ASX futures were up 124 points or 2.4% to 5397 at 6.59am AEST; futures surged more than 1% in the final half hour of trading in New York. The currency leapt 1.4% to 60.83 US cents.

The Dow, which opened up more than 800 points higher, gathered momentum through the day and ended up 1628 points or 7.7%. The S&P 500 rose 7%; the Nasdaq rose 7.3%.

ASX dips; RBA to slow bond buying; APRA warns on bank dividends 
The Australian sharemarket has closed the session lower despite the Reserve Bank of Australia suggesting it will roll back its yield curve control program.

The S&P/ASX 200 Index fell 34.5 points, or 0.7 per cent, to 5252.3, its smallest fall since February 21.

Six million dollars for each life saved is too high
The economic costs of this pandemic are clearly huge. Which led me to think not that the cure is worse than the disease but, more constructively, are there ways to lower the costs?

Let’s not be shy about balancing the economy against health. Governments do it all the time. The Pharmaceutical Benefits Advisory Committee rejects 69 per cent of anti-cancer drugs because they are not cost-effective.

This means the drug would cost the government (that is, society – us) more than $30,000-$70,000 for each (quality adjusted) year of life saved. Anything higher is too much; $4 million for a drug that saves a newborn for 80 happy years appears to be the yardstick.

COVID-19’s intergenerational wealth transfer
I have been surprised at just how negative some economists are about COVID-19. Not so much about the near term, where there is general agreement on the severity of the initial rise in unemployment, but rather about what happens on the “other side”. No “V-shaped” recovery and perhaps a stagnating “L”?

The “other side” will be different, but certainly not an “L”.

It’s possible the longer the health crisis and social distancing persists, the more likely some governments will run out of firepower so that more businesses won’t sustain. Banking problems could follow.

An alternative view is that social distancing works, the fiscal and monetary response is enormous, and for once it is putting money in the hands of the household sector instead of being isolated in the bloated interbank markets.

Crisis calls for a double guarantee covering wages and loans 
Now that Scott Morrison has finally conceded that fiscal stimulus, budget deficits and greater public debt are essential policy responses to a collapsing economy, it’s important to analyse whether the specific measures he has taken are optimal, given the current crisis.

The worst-kept secret in Canberra for months now has been Treasury trying to convince the Morrison government to embrace stimulus.

The only reason it refused was because this undermined the Coalition’s demonstrably false political narrative since the global financial crisis – that stimulus was bad in general, that ours was wasteful, and that it produced unmanageable debt and deficit.

‘This is going to change the entire real estate industry’
Vendors in a sharply weakening market are refusing to pay thousands of dollars upfront to advertise their properties, prompting agents to promote homes off-market and rely on their own networks rather than on listings portals and Domain.

The ban on public auctions and traditional open inspections that prompted more than half of last week’s scheduled 2684 auctions to be withdrawn has already prompted one real estate agent to demand a significant change from the two largest real estate portals – free listings.

Small businesses pin hopes on wage subsidies 
Tony Dench is one of some 277,000 business owners in Australia hoping the Coalition’s new wage subsidy package will help him keep his workers employed.

Business “dropped off a cliff” over the past fortnight at the family-run Dench Bakery, as the virus crisis hit both its cafe and wholesale bakehouse in Melbourne’s inner north, forcing Mr Dench to cut the hours of over 70 staff.

How the ‘hibernation’ strategy was hatched 
ANU professors Rabee Tourky and Rohan Pitchford, and a post-graduate student June Ma who is on extended study leave from the Reserve Bank of Australia, agreed the government and banks must instead work together to “hibernate” the economy as health measures forced industries to temporarily shut down.

“This is a big massive bear that is going to go to sleep. But its vital organs are still going to be working.”

David Murray says super is busted 
Five years after he handed the federal government the final report of the Financial System Inquiry David Murray is convinced the country’s superannuation system is broken.

Murray says the fact that thousands of Australians have, in recent weeks, rushed to switch out of balanced funds into cash after the stock market had fallen by about 38 per cent was an indication the system was not fit for purpose.

Nev Power’s plan to reboot Australian manufacturing 
Australia has an “enormous opportunity” to reboot its manufacturing sector by taking advantage of crippled global supply chains and a lower currency, says Nev Power, the man handpicked by the Prime Minister to lead an expert advisory commission.

Former DowDuPont executive Andrew Liveris has been recruited to work with the Power-led National COVID-19 Coordination Commission and devise a long-term strategy to deliver a competitive, best-in-class manufacturing sector as a major pillar in helping rebuild the economy.

Full disclosure: the only way to earn trust in the virus endurance test 
The verdict from one of Canberra’s medical experts was direct this week when police in Sydney and Melbourne started warning Australians to leave their local parks and stay indoors. Peter Collignon, an infectious diseases physician and a professor at the Australian National University, said the state decisions on hard lockdowns looked like “panic by politicians” rather than science.

His advice? Collignon said there was no good reason, other than official quarantine, to prevent someone going outside for fresh air, including exercise, provided they were not in groups and kept two metres away from each other.

Banks can do well by doing good this time 
As the Morrison government finalises plans for a so-called “hibernation plan” for business, banks will be called on to adjust further, deferring some repayments and restructuring others.

But unlike previous crises, the Australian banks are in better shape credit-wise. They have also simplified their businesses by shedding their wealth management arms, which will lighten the drag on earnings. In the case of ANZ, NAB and CBA, they have also sold their life insurance operations, which, is another positive as during times of high unemployment lapse rates go up.

Major to refund interest on deferred repayments 
A major bank has announced it will make payments to offset the interest costs that will accrue for customers who have been granted a six-month deferral on their home loan repayments due to the COVID-19 pandemic.

CBA group executive of retail banking services, Angus Sullivan explained, “When a home loan repayment is deferred for six months, interest is calculated and added to the loan balance each month which can result in customers paying interest on interest each month. “To support more Australians, we will make a one-time payment to all customers who are receiving a home loan deferral because of the coronavirus.”

The coronavirus may change us for the better 
One of the most difficult tasks we now face is actually working out what any kind of new normal might look like, and what it will require of politicians and government policies.

Consider, first, just some of the changes that have been forced on all of us – not by government fiat but circumstance – in just a couple of quick months. Changes we have all talked about for years.

Working from home, telehealth, online learning. These are all things that have happened to some extent in the past. But we have now been forced to adopt them on a scale never before imagined.

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