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Struggling borrowers will need to consider selling: ANZ – Sydney Morning Herald
One of ANZ Bank’s most senior bankers says some borrowers unable to meet their mortgage payments would need to consider selling their properties in the coming months.
“Were not forgiving repayments, the interest is being capitalised. So whilst interest rates are low, the debt that you have at the end of the deferral period is higher than what it otherwise would have been. So that will put a strain on the cash flow of a family or of a business,” he said.
While the property market has not crashed, he said the outlook for prices was uncertain, and some borrowers would need to consider selling.
“The growth that you might have anticipated might not come, so at some stage youre going to have to say: If I cant afford this mortgage, am I better off to rent, put my capital aside and wait until Im in a better position to buy back into the market?”
“I just think there are people who are going to have to make those decisions in the next few months.”
Amid concerns about the economic damage unleashed by Melbourne’s return to lockdown, Mr Hand said he expected a rise in the number of people taking advantage of an emergency scheme to pause payments on housing and small business loans.
“I think people are more educated now and this lockdown will create, I think, another spike in requests in Victoria in particular.”
Melbourne was this week put back into a lockdown to contain a worsening coronavirus outbreak, and on Friday ANZ Bank economists predicted the shutdown would dent the recovery, as the city accounts for about a fifth of national economic output.
Mr Hand said that while some business customers would manage, for others the emotional and financial strain might cause them to pull the pin. He said cafes and city restaurants could be especially hard hit, as largely deserted office towers hit spending such as on business lunches.
Some of those customers, I think, will say I just cant see how I can trade my way out of this, and will be wise enough to cut their losses, Mr Hand said.
Mr Hand, who has been working at home for 16 weeks, said 9 per cent of ANZ’s mortgages had been deferred. However, he said the bank’s data suggested as many as two-thirds of customers with deferrals had not seen a drop in their income, and the number of people resuming repayments would rise in weeks ahead.
ANZ Bank will provide more detail on how the deferrals are affecting its bad debts at a market briefing on August 19, when it will also update investors on dividends, which it suspended in May.
After the recent deterioration in Australia’s relations with China, Mr Hand said he had not seen evidence that this was directly worrying the banks SME clients, but some had moved to diversify their exposure other countries in the region, such as Vietnam.
JobSeeker payment: Pandemic sparked wage loss but rise in bank deposits – NEWS.com.au
JobSeeker payment: Pandemic sparked wage loss but rise in bank deposits
There is something very weird and strange going on in the Australian economy right now. You have to check out this graph that Commonwealth Bank has made. It is a bit of a mind-bender, so bear with me while I explain it.
The most important part of this graph is the black line. It shows how much money Australians are getting in their bank accounts this year compared to last year, from both wages and welfare. At the start of the year, pre-pandemic, the line was chugging along at about 4-5 per cent. That means that if you add up all the money Aussies made in February, it was about 4 or 5 per cent more than in February 2019, due to higher population, inflation, etc.
Then the pandemic strikes. You expect the black line to fall as we make less money. And what happens? The black line goes … up!
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When the pandemic strikes, wages fall (the blue bars) but government benefits go up (the red bars). What is so surprising here is that the rise in government benefits is so large that the total income of Australians (the black line) actually goes up – not down. We are, according to this proprietary data from Commonwealth Bank accounts, suddenly getting up to 12 per cent more money than last year.
The result is this: We are in a recession where Australians are pocketing more money not less. That is crazy! A recession where Australians make more money? It isn’t supposed to be like that.
Recessions are, by definition, times of falling national income, falling GDP. But Centrelink payments don’t count to GDP. So we can have falling GDP (it is expected to fall a bit over 4 per cent in the three months from March to June) but rising Australian incomes.
The big payments affecting the red bars are:
•The two $750 payments that went to pensioners and other welfare recipients early in the pandemic.
•The massive increase in the payment that used to be called the dole: JobSeeker. There were almost 1.5 million people getting JobSeeker in May, double the numbers in January, and it is $550 higher than it used to be.
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The red bars should not include JobKeeper (the $1500 wage subsidy), because that is paid to businesses who then pay their staff. JobKeeper does affect the graph though: The blue bars would have fallen much further without it.
Now let me explain an annoying technical detail of the chart, because the red bars and blue bars are a bit confusing. You can’t just read their values off the side of the chart. The size of the red and blue bars is their contribution to the height of the black line, not their absolute change. To lift total incomes by 6 per cent, welfare has to go up much more than 6 per cent (because it is only a small share of total incomes).
While wages and salaries have fallen (we know from other data they are down about 6 per cent compared to early this year) welfare has increased enormously, up about 300 per cent.
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This fact is hard to wrap your head around. The government has not just boosted welfare a little bit. It has boosted it enough to more than compensate Australia for the lost wages in this recession. I found it hard to believe at first. My scepticism was reduced, however when the latest retail sales data came out.
In this recession, retail spending has apparently gone up. Another topsy turvy result. In May, in the height of the pandemic, with lots of shops closed, Australians spent more money than usual, as the next chart shows.
In March we stocked up, in April we stayed home, in May I expected things to balance out. Instead there was a surprise jump in spending. One explanation for this is that on aggregate, thanks to the $750 payments and the much higher JobSeeker payment, Australians actually have more money to spend than usual. It will be very interesting to see if this new higher rate of spending continues in June. That data comes out in a couple of weeks.
WHAT THE GOVERNMENT MUST DO NOW
What this surprising chart tells us is just how important government spending has been to keeping the economy from being even worse. If the private sector isn’t spending, the government must. They’ve done that, and done it big time. Not just replacing missing incomes, but adding a bit extra to help compensate for the fear and nervousness. Credit to the Government for this. They are helping a lot.
Once we understand that, it raises the stakes massively on what to do with JobSeeker and JobKeeper in September. The Treasurer is scheduled to deliver a mini-Budget later in July, and if he slashes spending so incomes actually fall in total across Australia, that’s when we will get the traditional recession effect, with companies going bust and jobs being lost.
The trick will be to ramp the support down slowly. Let the red bars in the graph shrink only when the blue bars are rising. Otherwise the black line will fall and we will all be worse off.
Jason Murphy is an economist | @jasemurphy. He is the author of the book Incentivology.
Sudden ski fields closure leaves businesses reeling – The Australian Financial Review
US company Vail’s decision to shut the lifts at Victoria’s ski resorts Mount Hotham and Falls Creek on Thursday took local businesses by surprise.
He said Vail’s decision had “blindsided everyone”.
“I thought we could keep operating for regional Victoria. To me its the ultimate middle finger to the local market.
He said around 50 per cent of visitors came from regional Victoria, which unlike Melbourne is not in lockdown. That, he said, should have been enough to keep the resort open. He said he believed Vail’s decision had been a financial one, but added the US company’s communication of its intentions and reasoning had never been clear.
It looks now like the 2020 season will have run for a grand total of four days.
Theres been zero communication. Even in the early days of all this, I rang the ticketing people a number of times to understand what the strategy was, because we need to work with them to sell our accommodation.”
Bennett Mountjoy, owner of Snowline Hotel Harrietville, says he was ‘blindsided’ by Vail Resorts’ decision to close the lifts. James Fernyhough
It had been a slow start to the season for Mount Hotham, with some of the worst early conditions in 20 years. As a result, Vail had opened the resort only on Monday, with just a fraction of the lifts running. While Vail says it will consider reopening lifts on August 19, few locals think that is likely. It looks now like the 2020 season will have run for a grand total of four days.
“Personally I would have thought it would have been smarter if we didnt open this season, and I know a lot of businesses didnt want to,” said Liz Hoy, whose family owns four ski hire shops in Mount Hotham, Dinner Plain and Harrietville. “Financially we were going to lose money. Certainly if some of our employees werent on JobKeeper it wouldnt have been financially viable to open at all.
[Victorian Premier] Daniel Andrews wanted to open the snow season to generate revenue for the economy. But under the COVID regulations it was very difficult to operate because we cant fit a ski boot. Thats too close to somebody. If someone tries on a piece of rental equipment, I have to wash it every single article. You cant try on goggles to sell them. Theyre too close to your face.
She said she believed Vail’s decision was financial rather than health-based. “Theyve looked at their revenue in America and decided its not worth it for us,” she said.
Her business relies on the revenue it receives from hiring out skis, snowboards, clothing and snow chains. She is now facing 18 months of essentially no revenue. But she said the business would survive.
“Because were an 80-year-old family business, we always say this is like snowfarming. So if you cant ride a bad crop, you shouldnt be in the game,” she said.
“There was always an expectation in our mind that a bad season was coming, but certainly not to this devastating extent. Can the family ride it out? Yes, because weve been here so long. And youve got to build some fat in your business. But its not an ideal scenario,” she said.
“Swanny” runs a cafe and bakery with his wife Nikki on the main drag in Harrietville. He said he had watched “an exodus” from the snow following Thursday’s shock announcement. The village was eerily quiet on Friday morning during what would be peak season under normal circumstances.
“Wed be flat out normally. We have buses coming in, so theres 30, 40 people at a time. Thats not going to happen now,” he said. The strict social distancing and hygeine regulations have forced the cafe to offer takeaway only, even after the statewide restrictions were lifted.
“Theres two of us that work here, we just havent got enough time to clean up after everyone if we have to follow the health regulations and clean every space thats been utilised when people have been here.
He also said he thought it was unlikely the lifts would open in August.
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