A couple of charts thanks to the excellent UBS team:
Risk of lockdown extension means outlook driven by how much stimulus is left
With an increasing risk that Victoria’s lockdown is extended, limiting the labour market recovery, the outlook for Australian consumption and GDP depends on how much stimulus money is ‘left over’, given an unprecedented ‘policy cliff’ ahead. We estimate total policy stimulus was ~$72bn in Q2, and spiked to ~$110bn in Q3, but based on currently policy settings will drop back to ~$37bn in Q4 – a q/q reduction worth 15% of quarterly GDP. Hence, we estimate household cash flow boomed by a record ~5% q/q in Q2, and rose again in Q3, but will then slump by a record ~8% q/q in Q4.
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David Llewellyn-Smith is Chief Strategist at the MB Fund and MB Super. David is the founding publisher and editor of MacroBusiness and was the founding publisher and global economy editor of The Diplomat, the Asia Pacific’s leading geo-politics and economics portal.
He is also a former gold trader and economic commentator at The Sydney Morning Herald, The Age, the ABC and Business Spectator. He is the co-author of The Great Crash of 2008 with Ross Garnaut and was the editor of the second Garnaut Climate Change Review.
