Australia Consumer Confidence has slid down to a 5-year low, dropping down to 91.9 from the previous month of 95.5. Officially called the Westpac-Melbourne Institute Index of Consumer Sentiment, it fell 3.8%, and in its March report Westpac cited the coronavirus and the effect that it has had on the financial markets as the cause of this 5-year low. It is also the second lowest level that the Index has been, since the recession of 2008 when it managed to hit 79 points. The report also stated that while consumers were rightfully worried about short term economic impacts, they were not as concerned about the longer-term economic prospects, evidence of the notion that the coronavirus epidemic would be “large but temporary”.
This low confidence has also been reflected in the Australian dollar and stocks, as the AUD dropped 1.03% from the previous trading day, down to a low of 0.6492 against the greenback. It’s no surprise that investors are continuing to avoid high risk currencies such as the AUD in this volatile market, and instead place their funds into safe havens instead.
The ASX, or Australian Securities Exchange, has also been on a nosedive since the 20th of February, dropping 11.5%, from above 7,000 points to 5,700, reversing all gains made in the past 2 years.
This low confidence has also been reflected amongst the Australian public in such events as the now infamous toilet paper brawls, viral videos of women fighting over toilet paper in Australian supermarkets. The mass stockpiling of toilet paper has in fact become so bad that Woolworths, Australia’s largest supermarket chain, announced that they would be rationing toilet paper, and limiting the amount that people could buy down to 2. Another supermarket chain, Coles, has limited toilet paper purchase down to one per person.
This certainly seems to be an overreaction given that Australia’s coronavirus crisis has been relatively contained so far compared to other countries, with only 137. But the country appears to be preparing for the worst, as the first two cases of community transmission have now been confirmed within the country, and doctors are now bracing themselves for a proper outbreak.
Both cases of transmission were in the state of New South Wales. The first case was from a woman who had contracted it from her brother who had come from Iran. However the second case was the concerning one, as it came from a 53 year old health worker who had not been in contact with anyone infected or travelled to any countries with heavy infections.
Australia has also now placed a ban on travellers from Italy, in addition to its existing bans for Iran, South Korea, and China. For Australian citizens or permanent residents arriving from those countries, they will have to place themselves in self-isolation for 14 days. This move comes as the situation in Italy has become drastically more dire, as the entire country is now in quarantine.
It is now undoubtable that the coronavirus will cause an economic recession. And Australia’s economy will suffer a heavy blow, due to its trade connections with China. Even after a 25 basis point rate cut by the Reserve Bank of Australia to a record low of 0.5% and acknowledgement that it would ease monetary policy further if needed, Australia looks to be in for a rough time ahead.