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Australian economy storms ahead as COVID recovery turns 'V-shaped' – The Guardian

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By Swati Pandey

SYDNEY (Reuters) – Australia’s economy expanded at a much faster-than-expected pace in the final quarter of last year and all signs are that 2021 has started on a firm footing too helped by massive monetary and fiscal stimulus.

The economy accelerated 3.1% in the three months to December, data from the Australian Bureau of Statistics (ABS) showed on Wednesday, higher than forecasts for a 2.5% rise and follows an upwardly revised 3.4% gain in the third quarter.

Despite the best ever back-to-back quarters of growth, annual output still shrank 1.1%, underscoring the havoc wreaked by the coronavirus pandemic and suggesting policy support will still be needed for the A$2 trillion ($1.57 trillion) economy.

The Australian dollar rose about 10 pips to a day’s high of $0.7836 after the data while bond futures nudged lower with the three-year contract implying an yield of around 0.3% compared with the official cash rate of 0.1%.

“The ‘V-shaped’ nature of the recovery is everywhere to see – economic growth, the job market, retail spending and the housing market,” said Craig James, Sydney-based chief economist at CommSec.

James expects the economy to rebound 4.2% in 2021.

Data on credit and debit card spending by major banks as well as official figures on retail sales, employment and building activity point to a strong start for this year.

Marcel Thieliant, economist at Capital Economics, expects GDP growth of 4.5% in 2021, “which implies that allowing for the slump in net migration due to the closure of the border, the economy will suffer no permanent drop in output as a result of the pandemic.”

SUPPORT STILL NEEDED

Australia’s economy has performed better than its rich-world peers thanks to very low community transmission of COVID-19 together with massive and timely fiscal and monetary stimulus.

Its economic output declined 2.5% in 2020, far smaller than a 10% drop in United Kingdom, falls of 9% in Italy, 5% in Canada and more than 3% in the United States.

“Our economic recovery plan is working, and today’s national accounts is a testament to that fact,” Treasurer Josh Frydenberg said in a news conference. “The job is not done,” he added.

“There are challenges ahead. But you wouldn’t want to be in any other country but Australia as we begin 2021.”

To help blunt the economic shock from the pandemic-driven shutdowns, the Reserve Bank of Australia (RBA) slashed interest rates three times last year to a record low 0.1% and launched an unprecedented quantitative easing programme. The government announced a wage subsidy scheme to keep people in jobs while banks deferred payments on home loans and cut borrowing rates to help boost credit growth.

On Tuesday, the RBA re-committed to keep three-year yields at 0.1% until its employment and inflation objectives are met, which policymakers don’t expect until 2024 at the earliest.

Indeed, Wednesday’s data showed there was barely any domestic-driven inflation in the economy with the biggest price rises coming from commodity exports.

The RBA has repeatedly said the unemployment rate must fall to around 4% from above 6% now to help drive wages growth above 3% and for inflation to pop back into its 2-3% target band.

“Stimulus and support measures are still very much required,” CommSec’s James said. “Spare capacity will remain in the job market for a few more years, keeping the cash rate anchored at 0.1%.”

($1 = 1.2780 Australian dollars)

(Reporting by Swati Pandey; Editing by Sam Holmes)

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Britain is ‘bouncing back’ into the same old economy – The Guardian

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Britain is ‘bouncing back’ into the same old economy  The Guardian



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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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