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Increased Spending May Surge Until Christmas Says NAB Economists

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Post-lockdown spending in Australia may continue until Christmas. However, other sectors such as hospitality and tourism will continue to consolidate due to lockdown restrictions says economists at National Australia Bank. 

For the week ending in November 7, the spending rose to 5.4 percent year-on-year as lockdowns in Victoria eased as revealed in the figures from the country’s largest bank. 

The weekly spending in Victoria has surged up to 5 percent overall and reflected the first week of hospitality and retail traders being able to resume operations. 

Hospitality however remains at lower levels compared to 2019 due to the limitation that the restrictions bring in patrons and venues.  

NAB chief economist Alan Oster said, the December gross domestic product (GDP) may remain flat as a result of tapering of stimulus packages but the recent uptick in the spending and consumption is a sign of an improving economy. 

“We are dealing with the worst recession since the Great Depression … but the medium-term outlook for Australia is pretty good,” Mr. Oster said. 

“Hospitality is starting to move up … but is still lousy.” 

For the week ending in November 7, accommodation and food consumption was down 2.9 percent on the same period of 2019, while retail trade consumption was up 12.5 percent. 

Ana Marinkovic, the NAB head of small business said, the numbers that are deducted of business loans on deferral due to the pandemic was a positive sign. However, the road to a full recovery may take more time. 

“We need to prioritize the recovery of small business as they are key to our ongoing prosperity,” she said. 

“For most of that diversified small business sector I am seeing very strong green shoots and the ability to recover. In some cases also we have seen some businesses grow.”  

Ms. Marinkovic also noted travel, events and hospitality are the most affected due to the health crisis caused by the pandemic and further support will be needed while lockdown measures are not fully eased. 

Mr. Oster said the re-opening of state borders is needed before the holiday season to inject much-needed stimulus into areas of Australia that are reliant in tourism. 

“If we don’t open the borders, that can cause a lot of grief,” Mr. Oster said. 

“If you were going to get everybody who was going to go to Europe to go locally, you would add about 1 percent to GDP.” 

Reports that more Australians are going overseas than international visits in Australia. 

Technical Outlook 

 

In the daily charts of AUD/USD, the pair edged lower early Friday morning on Sydney session. 

As what we can see in the charts, the price broke out from the support at 0.72431. Despite the improving economic outlook in Australia, the US dollar is still flaunting its supremacy against all major currencies despite the uncertain sentiment in the US dollar that is brought by the news in vaccine and post-election activities. 

A further confirmation of the price falling from the support level at 0.72431 may push the price lower further to the next support level at 0.70098. However, If the price pulls back up from the 0.72431 level before the weekend, we may expect the Aussie dollar to continue its strength til next week.

 

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