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Economy looks dire but there are signs of hope

Business

Cairns could be facing 20 per cent unemployment following the severe slumps in retail and tourism while Brisbane, Sydney and Melbourne were likely to face the full brunt of the economic impacts, according to economists.

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Real estate transactions are likely to “drop off a cliff’’ since open homes and auctions were suspended and education was also going to take a big hit where international students don’t return, according to economist Pete Wargent.

He expected tourism companies would need some sort of government financial support.

“But China’s factories and economies were rumbling back to life, so with the Australian dollar under 60 cents, mining can eventually benefit as demand for commodities returns,’’ Wargent said.

“If China goes hard at stimulus then could be a decent period ahead for exports. But the short term will be painful like everywhere else.’’

QEAS economist Nick Behrens said it was too difficult to accurately model what will occur until Australia reaches its “peak infection’’ and anything before that was conjecture.

Westpac is willing to have a go before that point and yesterday claimed that the federal Budget deficit could blow out to $160 billion by 2020-21.

Conus Consulting economist Pete Faulkner agreed that no one really knew what the true impacts would be before knowing the health outcomes but said Queensland could be cushioned by its decentralised economy.

“Anyone trying to forecast where this goes at this stage is kidding themselves,’’ Faulkner said.

“It is clear, however, that government action at all levels is now focused on survival rather than stimulus and, as such, the Government’s response appears well targeted, although there remain concerns about the delays built into it.

“The fact that we have a far more diversified economy geographically, with half of our workforce based in regional areas, might help cushion some of the blow if we see shutdowns happening in capital cities, while regional centres might be able to continue to operate at some reduced level.

“What is clear from the numbers signing on in the past few days is that the unemployment picture will be dire.

“Forecasts coming from various sources of 11 per cent-plus unemployment would appear to me to be Cairns, obviously will suffer very badly. We are a region where about 15 per cent of the economy is driven by tourism and tourism now no longer exists as a sector in Australia.

“Combine that with the inevitable huge declines in the retail sector and it’s obvious that our economy is in for an enormous negative shock.

“It would not surprise me to see unemployment reach 20 per cent in the far north at least for a time.’’

“There is no doubt Australia will be in a recession if not depression in 2020.’’

 

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