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Australia Pulls Job Stimulus Worth 5% of GDP in Test for Economy – BNN

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(Bloomberg) — Australia’s JobKeeper wage subsidy expired Sunday, bringing to a close the nation’s largest Covid stimulus measure.

Treasury estimates up to 150,000 jobs could be lost with the end of the program and acknowledges some firms will collapse without government support. This could hit pause on a hiring boom that’s seen unemployment fall to 5.8% in February from a pandemic peak of 7.5% and early fears of 10% joblessness.

If all other labor market variables remained unchanged, Treasury’s upper estimate of job losses would send unemployment to 7%, according to calculations by Bloomberg News.

The government’s signature Covid-19 support program sought to keep workers attached to firms during lockdowns and other restrictions at an estimated cost of A$90 billion ($68 billion) — or around 5% of gross domestic product. The strategy, introduced at the beginning of the pandemic, was still subsidizing around 1.1 million workers at its conclusion, according to Treasury estimates.

While acknowledging the risks to these people, Treasury Secretary Steven Kennedy last week defended the decision to conclude JobKeeper. “The program has a number of features that create adverse incentives, which are likely to become more pronounced as the economy recovers,” he said.

Those sentiments were echoed by Reserve Bank of Australia Deputy Governor Guy Debelle, who said unemployment had fallen a lot faster than the central bank had anticipated. At the same time, he said “I don’t think we’re through the bumps and the unevenness yet. So it may not be a straight line from here.”

The RBA, in its February forecasts, predicted the jobless rate would be 6% by December this year and 5.5% at the end of next year. Under an optimistic scenario, it would fall to 4.75% by the end of 2022. Debelle said the bank hasn’t yet updated its outlook given the better-than-expected outcomes and will do so in its May update.

Upside Scenario

Since June 2020, Australia’s economy has generated more than 875,000 jobs and only shed positions in one month — September — that coincided with the southern state of Victoria’s second wave of Covid. The strength of the recovery suggests the labor market should absorb roles lost from the program expiring.

Job advertisements surged 7.2% in February and the RBA’s liaison with businesses indicated that some firms were having trouble finding suitable workers in select regions and industries.

Hiring should also be aided by New South Wales, the most populous state, scrapping a host of restrictions from Monday on the hospitality industry — one of the hardest hit by the pandemic — which should benefit businesses hamstrung by previous limits.

“The end of JobKeeper might mean a short spell in rehab for the economy, but its expiry will not be a medical emergency,” said Besa Deda, chief economist at St. George Bank. “The momentum in the jobs market will help the economy absorb its expiry. The unemployment rate should still end this year lower.”

Downside Risks

Yet the sheer scale of the program suggests there will be disruptions ahead. John Edwards, a former member of the RBA’s board and economic adviser to ex-Prime Minister Paul Keating, said JobKeeper’s removal represents “a fiscal contraction bigger than we’ve probably ever experienced.”

Australia’s border remains closed and isn’t likely to reopen until later in the year, at the earliest, leaving international education and tourism in flux. The government is assisting regions dependent on tourism and the airline industry via a A$1.2 billion package, yet further job losses are expected.

For Prime Minister Scott Morrison’s center-right government, the stimulus withdrawal poses a political risk. A rise in unemployment would erode the political capital accrued from the economy’s relative resilience at a time when popularity is already dented over the handling of scandals within parliament.

Last month’s jump in underemployment — or people employed who would like to work more hours — suggests there’s plenty of slack in the labor market.

“There is still more work to be done to lift hours back to pre-pandemic levels,” said Diana Mousina, senior economist at AMP Capital Investors Ltd. “There is still a larger than usual share of people who are working fewer hours because there is no work, there isn’t enough work or they have been stood down.”

She notes 167,500 people — or 1.3% of those employed — fit into this category and represent “the group that is most at risk of job loss after JobKeeper expires.”

©2021 Bloomberg L.P.

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CANADA STOCKS – TSX ends flat at 19,228.03

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* The Toronto Stock Exchange’s TSX falls 0.00 percent to 19,228.03

* Leading the index were Corus Entertainment Inc <CJRb.TO​>, up 7.0%, Methanex Corp​, up 6.4%, and Canaccord Genuity Group Inc​, higher by 5.5%.

* Lagging shares were Denison Mines Corp​​, down 7.0%, Trillium Therapeutics Inc​, down 7.0%, and Nexgen Energy Ltd​, lower by 5.7%.

* On the TSX 93 issues rose and 128 fell as a 0.7-to-1 ratio favored decliners. There were 26 new highs and no new lows, with total volume of 183.7 million shares.

* The most heavily traded shares by volume were Toronto-dominion Bank, Nutrien Ltd and Organigram Holdings Inc.

* The TSX’s energy group fell 1.61 points, or 1.4%, while the financials sector climbed 0.67 points, or 0.2%.

* West Texas Intermediate crude futures fell 0.44%, or $0.26, to $59.34 a barrel. Brent crude  fell 0.24%, or $0.15, to $63.05 [O/R]

* The TSX is up 10.3% for the year.

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Canadian dollar outshines G10 peers, boosted by jobs surge

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Canadian dollar

By Fergal Smith

TORONTO (Reuters) – The Canadian dollar advanced against its broadly stronger U.S. counterpart on Friday as data showing the economy added far more jobs than expected in March offset lower oil prices, with the loonie also gaining for the week.

Canada added 303,100 jobs in March, triple analyst expectations, driven by the recovery across sectors hit by shutdowns in December and January to curb the new coronavirus.

“The Canadian economy keeps beating expectations,” said Michael Goshko, corporate risk manager at Western Union Business Solutions. “It seems like the economy is adapting to these closures and restrictions.”

Stronger-than-expected economic growth could pull forward the timing of the first interest rate hike by the Bank of Canada, Goshko said.

The central bank has signaled that its benchmark rate will stay at a record low of 0.25% until 2023. It is due to update its economic forecasts on April 21, when some analysts expect it to cut bond purchases.

The Canadian dollar was trading 0.3% higher at 1.2530 to the greenback, or 79.81 U.S. cents, the biggest gain among G10 currencies. For the week, it was also up 0.3%.

Still, speculators have cut their bullish bets on the Canadian dollar to the lowest since December, data from the U.S. Commodity Futures Trading Commission showed. As of April 6, net long positions had fallen to 2,690 contracts from 6,518 in the prior week.

The price of oil, one of Canada‘s major exports, was pressured by rising supplies from major producers. U.S. crude prices settled 0.5% lower at $59.32 a barrel, while the U.S. dollar gained ground against a basket of major currencies, supported by higher U.S. Treasury yields.

Canadian government bond yields also climbed and the curve steepened, with the 10-year up 4.1 basis points at 1.502%.

 

(Reporting by Fergal Smith; Editing by Andrea Ricci)

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Canadian dollar rebounds from one-week low ahead of jobs data

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Canadian dollar

By Fergal Smith

TORONTO (Reuters) -The Canadian dollar strengthened against its U.S. counterpart on Thursday, recovering from a one-week low the day before, as the level of oil prices bolstered the medium-term outlook for the currency and ahead of domestic jobs data on Friday.

The Canadian dollar was trading 0.4% higher at 1.2560 to the greenback, or 79.62 U.S. cents. On Wednesday, it touched its weakest intraday level since March 31 at 1.2634.

“We have seen partial retracement from the decline over the last couple of days,” said Greg Anderson, global head of foreign exchange strategy at BMO Capital Markets.

“With oil prices where they are – let’s call WCS still at roughly $49 a barrel – I still think CAD has room to strengthen over the medium term and even over a one-week horizon.”

Western Canadian Select (WCS), the heavy blend of oil that Canada produces, trades at a discount to the U.S. benchmark. U.S. crude futures settled 0.3% lower at $59.60 a barrel, but were up nearly 80% since last November.

The S&P 500 closed at a record high as Treasury yields fell following softer-than-anticipated labor market data, while the U.S. dollar fell to a two-week low against a basket of major currencies.

Canada‘s employment report for March, due on Friday, could offer clues on the Bank of Canada‘s policy outlook. The central bank has become more upbeat about prospects for economic growth, while some strategists expect it to cut bond purchases at its next interest rate announcement on April 21.

On a more cautious note for the economy, Ontario, Canada‘s most populous province, initiated a four-week stay-at-home order as it battles a third wave of the COVID-19 pandemic.

Canadian government bond yields were lower across a flatter curve in sympathy with U.S. Treasuries. The 10-year fell 3.3 basis points to 1.469%.

(Reporting by Fergal Smith;Editing by Alison Williams and Jonathan Oatis)

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