The Australian economy is slowly being reopened and Treasurer Josh Frydenberg has expressed the opinion that the time was right to start boosting employment and bringing people back to work. Treasury analysis predicts that close to 400,000 people in the food and accommodation workforce should be back by July and more than 850,000 jobs are expected to be restored by step three of Australia’s recovery plan. Of course, the big question on everyone’s mind is what happens to the economy once the extraordinary government handouts run out later this year?
The China trade tension continues to deteriorate with sanctions imposed against Australia by China on beef and barley over the past week. Clearly, these trade tensions won’t reverse overnight and is a strong sign that the globalisation we experienced over the past twenty years is coming to an end which will complicate trade and increase all sorts of costs.
Meanwhile, in the US the Fed Chairman has warned that the US economy could take longer than a year to recover from the corona virus shock which is on top of his recent comments that there would be some more fiscal stimulus needed from the government. In a recent interview he said that it may take a while and it could stretch through the end of next year.
Stock markets globally continue to rally on the back of the Fed’s comments surprising most commentators. The bond markets on the other hand are still way more sceptical and we have seen some steepening in the government yield curves. It appears as though the 10-year yield wants to break out of its trading range on the upside but it has not done it so far. On the new issue front, we have seen some steady pick up of volume which is a further positive sign.