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Australia central bank sees glimmer of hope as economy restarts after pandemic shutdown – The Guardian



By Swati Pandey

SYDNEY (Reuters) – Australia’s central bank held rates at all-time lows on Tuesday and sounded less gloomy as the economy gradually re-opens during what is likely to be the worst quarter since the Great Depression.

The Reserve Bank of Australia (RBA) left rates at 0.25% at its monthly policy meeting in a widely expected decision, and said the “accommodative approach will be maintained as long as it is required.”

In a short post-meeting statement Governor Philip Lowe said the RBA was prepared to scale up government bond purchases if needed to ensure three-year yields held around 25 basis points.

Australia’s A$2 trillion ($1.4 trillion) economy is experiencing its biggest contraction since the 1930s in the current quarter but “it is possible that the depth of the downturn will be less than earlier expected,” Lowe added.

A significant decline in new infections, earlier-than-expected easing of restrictions and signs that hours worked stabilised in early May auger well for a recovery.

“There has also been a pick-up in some forms of consumer spending,” Lowe added.

States and territories across Australia have been easing social distancing regulations at differing paces in recent weeks, slowly ending a partial lockdown ordered in March, having largely contained the COVID-19 pandemic.

Australia, which has about 7,200 coronavirus cases, has not reported a death from the disease for more than a week.

The country’s success in containing the virus has sent the Aussie dollar soaring to five-month highs. Yet, that is leaning against monetary stimulus and won’t be welcome by the RBA.

The central bank made no mention of the exchange rate in the statement.

Highlighting the depth of the pandemic-driven global economic downturn and the fallout on Australia, many economists expect interest rates to remain at record lows for at least two more years.

Some are even predicting negative interest rates, though Lowe has ruled it out.

“While we have also become more optimistic about the outlook for the economy in recent weeks, we still expect the unemployment rate to jump to nearly 9% by Q3,” said Capital Economics analyst Marcel Thieliant.

He expects the central bank to announce an expansion of its government bond buying programme at its August policy meeting.

“And we only expect the unemployment rate to fall below 7% by 2022. That would leave it far above the RBA’s estimate of the natural rate of 4.5%, underlining that the RBA will miss its full employment mandate for years to come.”


Official data out earlier showed Australia boasted a record current account surplus last quarter as firm export prices and a fall in imports provided a timely boost to growth.

Other data out on Tuesday showed government spending also added to growth in the March quarter, while companies reported better sales and profits than many expected.

The figures led analysts to upgrade their forecast for first-quarter gross domestic product due Wednesday with some saying the economy might not have shrunk in the quarter as previously feared.

GDP had been forecast to show output contracted 0.3%, the first fall since early 2011.

“A small positive print cannot be ruled out,” said Su-Lin Ong, chief economist at RBC Capital Markets.

“But the likely collapse in activity in the current quarter and accompanying impact on the labour market…is a sharp and deep shock through the whole economy with likely lasting ramifications.”

(Reporting by Swati Pandey; Editing by Shri Navaratnam)

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Investing in conservation generates huge returns for economy, study finds –



With Earth’s wildlife now facing an extinction crisis, a group of economists and scientists is hoping to persuade governments that it pays to protect nature.

Specifically, expanding areas under conservation could yield a return of at least $5 for every $1 spent just by giving nature more room to thrive.

That in turn would boost agricultural and forestry yields, improve freshwater supplies, preserve wildlife and help fight climate change — all of which would boost global economic output on average by about $337 billion ($250 billion US) annually, the group of more than 100 researchers argues in a paper published online Wednesday by The Campaign for Nature, a coalition of conservation organizations from around the world.

A bunch of grapes is pictured in a vineyard few days before harvest in Cenac, France, September 17, 2019. Preserving natural areas boost agricultural and forestry yields, the report found. (Regis Duvignau/Reuters)

The work represents one of the most comprehensive studies of the potential economic benefits from protecting nature — a research area fraught with best-guess estimates on the monetary value of animals, plants and ecosystems left intact.

Released as the United Nations lobbies governments to set aside 30 per cent of their land and sea by 2030, the report aims to challenge the notion that conservation is costly.

“You cannot put a price tag on nature, but the economic numbers point to its protection,” said Anthony Waldron, an ecologist at the University of Cambridge who lead the group examining the economic implications of designating a third of the Earth as a nature reserve.

Others question how precise accounting for nature’s economic contribution is even possible, said Bram Büscher, a political scientist at Wageningen University & Research in the Netherlands.

“What are two ducks worth? And would these ducks in the U.S. be the same as in Latin America? And how would you compare those things, and what would be their role?” Büscher told Reuters.

Economic arguments can backfire

Leaning too heavily on economic arguments could also backfire, if governments end up opening areas deemed valuable to the highest bidders, warned Julia Steinberger, an environmental economist at the University of Leeds.

“All it takes is one lobbyist to come along and say, ‘This program is no longer economically viable,'” Steinberger said. “That’s the risk we see when we tie environmental protection to economic performance.”

But even a rough estimate of nature’s economic value is better than nothing, given the scale of what is at stake, the report’s authors argue. Scientists estimate that at least a million species are facing extinction in the next few decades, largely due to human-driven activities including habitat loss, pollution and climate change.

Hoping to halt the global die-off, 30 countries are already backing a draft document pledging to conserve 30 per cent of the Earth’s surface by 2030, which will be discussed at the UN Biodiversity Convention postponed to next year in Kunming, China.

Sea lions are seen in San Cristobal Island at Galapagos Marine Reserve, Ecuador, October 10, 2016. Currently, about 15 per cent of the Earth’s land and 7 per cent of the ocean has some degree of protection. (Nacho Doce/Reuters)

Currently, about 15 per cent of the Earth’s land and 7 per cent of the ocean has some degree of protection.

A 30 per cent conservation goal, aside from producing natural resources like fish stocks and timber, would also help to guarantee healthy ecosystems that provide an additional $472 billion ($350 billion US) a year in services that are essential to life, including filtering water, clearing air pollutants or preventing coastal erosion, the report said.

Such a goal would require an average annual investment of roughly $189 billion ($140 billion US) by 2030, the researchers estimated. Currently, about $32 billion ($24 billion US) is spent globally per year on protecting natural areas, they said.

“The well-being of humanity and global economic prosperity depends on us fixing our broken relationship with nature,” said report co-author Enric Sala, an ocean explorer in residence at National Geographic Society.

The report said that a major expansion in protected areas would have to be managed carefully to ensure that the economic benefits were spread evenly throughout populations.

But first, countries have to join the effort. And even then, compliance is not guaranteed. Despite having more than 190 countries pledge to fight climate change under the 2015 Paris Agreement, emissions of heat-trapping gases continue to rise.

Nevertheless, with some U.S. states pledging to reduce greenhouse gas emissions, there is growing interest in finding ways to account for the economic benefits provided by forests and other ecosystems, said economist John Talberth at the Center For Sustainable Economy in Portland, Oregon.

Understanding these economic benefits can also help policymakers decide, for example, whether a forest can be felled for timber or better left untouched to absorb carbon dioxide and support wildlife or water cycles. “The climate crisis has put a foot on the accelerator of getting this done,” Talberth said.

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Where will Canada’s coronavirus economy go next? Here are 3 possible scenarios –



The fiscal “snapshot” of the state of Canada’s finances amid the coronavirus pandemic makes it clear that a high level of economic uncertainty remains.

But officials still outlined several possible scenarios for what could come next for Canada’s economy — and they depend on whether there is a serious second wave of COVID-19 transmission.

Read more:
Canada’s coronavirus deficit soaring to $343B as feds warn of ‘permanent change’ to economy

In a news conference with reporters, Finance Minister Bill Morneau said the snapshot included what the federal government knows now and “a sense” of what officials think will occur in the short term, noting that “the ability to forecast is extremely difficult” at this time.

Here are three possible scenarios outlined in the snapshot released on Wednesday:

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The main economic outlook

The main economic outlook for Canada contained in the document is based on the results of a survey of private-sector economists conducted by the federal finance department in the third week of May.

Federal officials are using the average of those results as the basis for its fiscal projections for the year ahead.

The results of the survey are “most consistent with slow, steady and relatively low levels of ongoing community transmission of the virus,” according to the government’s snapshot.

Read more:
Canada reviewing its coronavirus aid to prepare for possible 2nd wave, Trudeau says

The unemployment rate — which peaked in the second quarter of 2020 — may remain higher than pre-COVID-19 levels throughout the rest of 2020 and 2021, declining gradually to around seven per cent by the end of 2021, the projections showed.

The average results of the survey also showed private-sector economists expect the country’s real GDP to drop 6.8 per cent in 2020 — a contraction expected to be “much worse than experienced during the 2008-2009 financial crisis.”

Coronavirus: Trudeau says federal government went into debt so Canadians ‘wouldn’t have to’

Coronavirus: Trudeau says federal government went into debt so Canadians ‘wouldn’t have to’

But the average of the forecasts predicted “a faster rebound in real GDP than in the past three recessions,” positing that real GDP would rebound by 5.5 per cent in 2021.

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“While private-sector views are relatively aligned on the magnitude of the second-quarter decline [in 2020], their third-quarter growth forecasts diverge widely, reflecting tremendous uncertainty around, for example, the pace of rehiring and investment, rebound in consumer activity, etc.,” the snapshot read.

Fiscal Snapshot: Morneau says keeping COVID-19 transmission rate down key part of economic plan

Fiscal Snapshot: Morneau says keeping COVID-19 transmission rate down key part of economic plan

A “further resurgence” of the coronavirus in Canada and a second wave of measures to contain it “would severely hamper the economic recovery” — but that resurgence could still be “less economically damaging” than the first wave, the report cautioned.

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Citing the “high degree” of uncertainty over how the pandemic will continue to unfold from both public health and economic perspectives and Canadians’ level of caution during that time, the federal government also included two “alternative scenarios” to economists’ projections in its snapshot, which painted more grim outlooks.

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The ‘uneven and gradual recovery’ scenario

The first alternative scenario outlined a more “uneven and gradual recovery” from the pandemic, assuming a “slower pace of return to normal” of economic activity and “repetitive peaks of viral transmission.”

Under that first scenario, households would continue to avoid most public spaces and activities, while businesses wouldn’t fully rebound amid “stringent containment measures” and would continue to operate below capacity.

Read more:
Does the coronavirus pandemic really come in waves? Experts raise doubts

Those “prolonged shutdowns” would result in more permanent, rather than temporary, job losses, resulting in a “more uneven recovery” across the country and a drop in real GDP of 9.6 per cent in 2020.

“With the pace of business resumption still uncertain, it is unknown whether this scenario will come to pass or not, but it illustrates the potential downside risks that could still exist,” the snapshot noted.

The ‘virus resurgence scenario’

The second scenario considers a serious resurgence of COVID-19 with “uncontrolled transmission” and a sharp increase in new cases later in 2020, evolving into a series of smaller waves of transmission next year.

In that scenario, the resurgence would occur at the same time as the annual flu season and force another round of social and economic shutdowns as part of renewed containment measures.

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Read more:
2nd coronavirus wave could have ‘serious impact’ on economy, Bank of Canada says

Economic activity would tank again, and while it might be less severe than during the first wave, the economic damage would be “large,” the document said — resulting in re-closed businesses, fresh layoffs and less spending.

“Overall, this translates into a deeper and longer-lasting negative impact on the economy, with a decline of 11.2 per cent in real GDP in 2020 and the level of real GDP remaining below that of even the most pessimistic private-sector forecast by the end of 2021,” the document said of the second alternative scenario.

Longer-term economic update coming in the fall: Morneau

Which scenario Canada is headed toward may become clearer later this year.

Morneau told reporters the government intends to release a meatier, longer-term economic update or budget and its plans for the “path forward” in the fall, when officials “have more information.”

“We are in a situation where the ability to forecast is extremely difficult,” the finance minister said.

Fiscal Snapshot: Morneau details how COVID-19 benefits have helped Canadians, businesses

Fiscal Snapshot: Morneau details how COVID-19 benefits have helped Canadians, businesses

Canada is indeed “in unprecedented times,” Sahir Khan, executive vice-president of the Institute of Fiscal Studies and Democracy at the University of Ottawa, told Global News.

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“Whatever number you put out, it’s going to be wrong no matter what,” Khan said.

“For better or for worse, I think we are looking at the federal government as the resource that can restart this economy because I think we don’t have anywhere else to turn.”

Fiscal Snapshot: Scheer says Morneau gave no plan to support reopening

Fiscal Snapshot: Scheer says Morneau gave no plan to support reopening

In a statement following the release of the fiscal snapshot on Wednesday, the president and CEO of the Canadian Chamber of Commerce criticized the government for not including a “longer-term fiscal plan” in its fiscal snapshot.

“Today should have been an opportunity to offer Canadians a clear picture of the challenges and a coherent strategy to address them,” Perrin Beatty wrote.

© 2020 Global News, a division of Corus Entertainment Inc.

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Fiscal 'snapshot' to reveal economic impact of COVID-19 on Canadian economy – CTV News



Canadians will get a clearer picture of the current state of the economy and national deficit when Finance Minister Bill Morneau unveils what’s been billed as an economic and fiscal “snapshot” on Wednesday afternoon. Morneau will present the snapshot inside the House of Commons—which is gathered for a special committee of the whole session— at around 1:40 p.m. ET.

Speaking to reporters in advance of the snapshot being made public, Prime Minister Justin Trudeau said it’s clear that certain sectors will bounce back and some people will be able to find work, but others won’t, and so ongoing government support will be necessary through the economic rebound phase.

“When the pandemic first hit, a lot of people lost their jobs overnight. They didn’t know how they were going to feed their families, or pay their bills. Faced with this unprecedented challenge our government had two options: We could sit back and let Canadians fend for themselves… or we could swiftly and substantially choose to support Canadians. We chose to support Canadians,” Trudeau said.

The report—which is not a federal budget or a fiscal update—is set to show the current state of the federal deficit and the impact of the nearly more than $193 billion in spending on direct COVID-19 aid to Canadians as well as health and safety measures. Among the biggest ticket items to date: the $2,000 a month Canada Emergency Response Benefit; the 75 per cent wage subsidy; and the Canada Emergency Business Account, which offers businesses loans of up to $40,000. 

The snapshot is also going to look at how Canada’s economic response compares to that of other countries and forecast what can be expected economically in the months ahead. 

The overall economic numbers will be the first offered by the federal government since a December 2019 update—the only of the Liberal minority since the last election—which projected the deficit would rise to $28.1 billion in 2020-21.

The 2020 federal budget date was scheduled to be March 30 but that was cancelled due to the surging COVID-19 pandemic at the time.

In the December update, Canada’s debt-to-GDP ratio was at 30.9 per cent and projected to remain on track to reduce incrementally over the next few years.

Over the last few months federal job numbers have already showed millions are out of work, and a growing list of businesses are set to shutter their doors permanently.

In an effort to buoy businesses big and small, in addition to the direct spending offered, the federal government has offered billions in liquidity and government-guaranteed loans which Morneau has said he hopes will bridge key job creators in this country to better times.

Today’s snapshot comes after opposition parties and economists called for a more robust fiscal update. Already the Conservatives and New Democrats have spelled out what they expect to see from the economic report card. While the Conservatives are calling for a clear path out of the red—which is now likely to be a years-long endeavour—the NDP want to see a plan for continuing to support those disproportionately impacted by the economic downturn. 

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