Via the excellent George Theranou at UBS:
Fiscal stimulus of $75bn, or 3.7% of GDP so far; but only 1.5% of GDP is in Q2
The total Government (Federal + State) fiscal stimulus, so far, is ~$75bn, or ~3.8% of (2019) GDP – but only ~$31bn (or 1.5% of GDP) in Q2-20. In addition, the authorities (RBA/AOFM/Treasury) created credit support and guarantees of $125bn (or 6.3% of GDP). Together, fiscal measures total almost $200bn, or 10% of GDP. Meanwhile, the RBA’s QE bought $21bn of Government bonds ($18bn Commonwealth & $3bn Semis), or 1% of GDP, or 2% of debt. Lenders also paused repayments (principal & interest) for 6 months, for both SMEs (~$8bn) as well as household debt (potentially ~ $30-$50bn).Q2 GDPe cut to -10% q/q, worst ever; persistent lockdown may see Depression
However, given further lockdowns this week (and more looming), we again revise down our real GDP forecast for 2020 to -6.1% y/y (was -5.4%), by far the worst since WW-II. Q1-20 is likely sharply negative already at -1.4% q/q and +0.3% y/y – given that even before the lockdowns, consumer sentiment had the largest ever fall (-28% w/w), and shopping centre foot traffic was ~flat two weeks ago, but -46% y/y last week. Q2 GDP is set to collapse to ~-10% q/q (i.e. -40% annualised, revised from -7% q/q), and to -10.4% y/y. This is even worse than any quarter during prior Depressions. Indeed, prior downturns – which are mainly demand &/or financial shocks – aren’t comparable. This time is unprecedented, as the supply side of the most of the economy has been (partly or fully) shut to combat a health crisis. Our new forecasts assume lockdowns ‘flatten the curve’ of COVID-19 cases, allowing some easing of restrictions, & hence normalisation of activity from late-Q2 onwards (which sees a sharp rebound in Q3 GDP onwards); but also relies upon material further fiscal (wage) stimulus in the near term.
