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Australia

General Market Update

24 Mar 2020
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The real-world impact of the pandemic is becoming more severe by the day, and this is forcing more and more world governments into China-style lockdowns in an attempt to suppress the spread of the virus while each country’s defence capabilities can be built up. It seems that in Australia we are only days away from a similar response . . .

The real-world impact of the pandemic is becoming more severe by the day, and this is forcing more and more world governments into China-style lockdowns in an attempt to suppress the spread of the virus while each country’s defence capabilities can be built up. It seems that in Australia we are only days away from a similar response, and several state premiers are moving ahead of the federal response. There is plenty of good analysis out there that suggests that this will be both the best outcome for both the healthcare system as well as the economic recovery, but with no clear consensus, we are going to start seeing different governments approach things differently.

Only this morning, Donald Trump signalled his eagerness to restart the economy in the short-term even though the healthcare system will be overwhelmed. A number of Republican governors seem to be on board with the plan – the Florida governor, for example, has kept businesses open despite the aging population – but this will not jibe with the plans of some of the bigger states such as California and New York which are facing big outbreaks and have effectively isolated their citizens.

With this plan, in stark contrast to the many other large countries, it is likely we will start seeing very different trajectories for international infection rates, GDP growth and ultimately stock markets. In Australia, I think the China template is the more likely model we are going to follow, and the hope is that we can follow the recovery seen there. Given the likely bounce in GDP, I think that would be a best-case scenario for our economy and would perhaps be the trigger for a bounce in the local market.

 

Rivkin does not ever provide financial advice. Please consider your own circumstances before purchasing any of our products or acting on our general advice, for any Rivkin product or recommendation.

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