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Australian State Eases Lockdown as Covid-19 Cases Fall

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The state at the epicenter of Australia’s Covid-19 outbreak announced an easing of restrictions on Sunday, but left many businesses shuttered until next month to ensure community transmission is further curbed.

From midnight, the 5 million residents of Victoria state capital Melbourne, who have been under lockdown for more than 100 days, will be allowed to travel as far as 25 kilometers (16 miles) from their homes and the two-hour time limit on daily exercise will be scrapped, state Premier Daniel Andrews said.

The stay-at-home order will be completely lifted from Nov. 1 and the retail and hospitality sectors will largely reopen. That timeframe may be brought forward if case numbers continue to fall.

“These lockdowns have come with pain and damage and hurt, but the strategy is working,” Andrews told reporters. “As other parts of the world are going into a deadly winter, with lockdowns and restrictions that are heartbreaking,” Victoria can now “build a Covid-normal 2021,” he said.

The state’s response has demonstrated the effectiveness of tight controls, just as the U.S., U.K. and many European countries weigh their policy response to a second wave. New cases have plunged from a daily peak of 687 on Aug. 4, with infections slowing to a trickle.

For more on coronavirus:
Victoria Eases Curbs; U.S. Cases Rise by 69,000: Virus Update
New Zealand Has First Community Case of Covid-19 in Three Weeks
Treat Covid-19 Early to Save Patients’ Lives, SARS Veteran Urges
Who’s Succeeding Against the Coronavirus and Why: QuickTake

But Andrews has come under sustained criticism for imposing the strict lockdown that’s risked people’s mental health and dragged on the national economy. Victoria is responsible for about a quarter of gross domestic product and the restrictions have deepened Australia’s first recession in almost 30 years.

“The second wave, which led to the lockdown, has taken an extreme toll on the mental health of Victorians and their economic prospects,” Treasurer Josh Frydenberg wrote in an opinion piece. “Now is time for the Victorian government to give Victorians their freedom back and allow businesses to reopen in a Covid-safe way.”

The state reported two new coronavirus cases on Sunday and no deaths, bringing the 14-day average to eight, with 15 cases from an unknown source. Victoria has been focused on cutting the rolling average and number of mystery cases to below five.

Andrews noted that daily cases in his state and the U.K. were comparable back in August.

“Today, as Victoria records two new cases, the U.K. hit 16,171,” he said. “And as we continue easing our restrictions, they are being forced to increase theirs.”

From midnight across Melbourne, tennis courts, golf courses and skateparks will reopen, hairdressers can resume business and as many as 10 people can take part in outside auctions for residential property — an important boost for the housing market. Up to 10 people from two households can gather outdoors.

From Nov. 1, remaining retail and restaurants, cafes, pubs and services such as beauty salons will reopen.

In regional Victoria, where numbers are considerably lower, many of the controls have already been eased and pubs and restaurants will be allowed to have more customers from midnight.

Australia has been at the vanguard of nations seeing success in controlling community transmission. Its first nationwide lockdown, which lasted roughly from March to May, was one of the most successful in the world, reducing the number of cases to just a handful a day. But security failures at quarantine hotels for returning travelers and poor communication of critical information to migrant communities allowed the virus to roar back in Victoria.

Much of the nation has crushed community transmission, as states such as Queensland, Western Australia and Tasmania restrict entry to people from virus hotspots. The international border remains closed to non-residents, other than a limited travel bubble with New Zealand, and those returning from overseas must undergo 14 days of quarantine in hotels or other government-run facilities.

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Business

Australia says it's ready to talk to China about their trade dispute

  • Two Australian cotton industry groups said that China has started discouraging its spinning mills from using cotton imported from Down Under.
  • Cotton is the latest agricultural product getting caught in the middle of tensions between Beijing and Canberra after the latter supported a growing call earlier this year for an international inquiry into China's handling of the coronavirus pandemic.
  • China took a number of measures against Australian exporters in 2020: that incudes anti-dumping and anti-subsidy duties on Australian barley and reportedly giving state-owned utilities and steel mills verbal notice to stop importing Australian coal.

SINGAPORE — Australia wants dialogue with China to resolve their trade dispute and clear up any misunderstandings with its largest trading partner, Australian agriculture minister David Littleproud told CNBC Friday.

Two Australian cotton industry groups said China has started discouraging its spinning mills from using cotton imported from Down Under.

"It has become clear to our industry that the National Development Reform Commission in China has recently been discouraging their country's spinning mills from using Australian cotton," Adam Kay, CEO of Cotton Australia, and Michael O'Rielley, chair of Australian Cotton Shippers Association, said in a statement.

China's Ministry of Commerce has yet to officially respond.

Littleproud told CNBC's Will Koulouris that he will be writing to his counterpart in China to get clarity on the situation.

"I think it's important we get clarification before we jump the gun on this. That's why we are working with the industry and Beijing to make sure we get some answers," he said.

Two years ago, China added about 800,000 tons in additional cotton import quotas subject to a sliding duty to meet the demands of its textile industry, according to a U.S. Department of Agriculture report.

Under Beijing's commitments to the World Trade Organization, that means China is obligated to annually allocate 894,000 tons of cotton imports that are subjected to a 1% import tariff, the U.S. report from 2018 said. Any imports above that quota would incur a 40% duty and is not commercially viable for exporters given market prices.

"What we're concerned is there are reports that Chinese officials are telling millers not to give Australian cotton the opportunity to participate in that initial quota," Littleproud told CNBC, adding the industry was working to ensure there are alternate markets available.

"So, Indonesia, Vietnam, and India all take significant portions of our cotton crop," he said, referring to a free trade agreement with Indonesia that was ratified months earlier.

Souring trade relations

Cotton is the latest agricultural product caught in the middle of the trade dispute between the two countries, after Australia earlier this year supported a growing call for an international inquiry into China's handling of the coronavirus pandemic.

China took a number of measures against Australian exporters this year. They include anti-dumping and anti-subsidy duties on Australian barley, an import ban on four Australian red meat abattoirs and reportedly giving state-owned utilities and steel mills verbal notice to stop importing Australian coal. Beijing has also launched investigations into imports of Australian wine.

China is Australia's largest trading partner in goods and services and accounts for about 27.4% of Australia's trade with the world, according to the Australian government. In 2019, trade between the two countries reached a record 252 billion Australian dollars ($178.5 billion), up 17.3% on-year. Australia and China signed a free trade agreement that went into effect on Dec. 20, 2015.

Littleproud ruled out short-term subsidy for farmers but said the Australian government was working to ensure they have the opportunity to spread out their risk.

"We have said to our exporters whether they'd be caught in wine, barley, we provided up to 14 free trade agreements around the world and give you the opportunity to spread that risk. It is a commercial decision for our exporters in every industry to make that determination," he said.

"So obviously, they will make assessments around the risks of trading into China, as that obviously is another simple business principle, the greater the risk, the greater rewards you seek," Littleproud added.

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Economy

Australia Government Unveils Fresh Stimulus

Australia’s government unveiled fresh fiscal stimulus measures on Tuesday, pushing the budget deficit to a record level as the economy faces significant challenges from the once-in-a-century coronavirus pandemic.

“There is no economic recovery without a jobs recovery,” Treasurer Josh Frydenberg told lawmakers. “There is no budget recovery without a jobs recovery.”

The unemployment rate is expected to peak at around 8 percent in the December quarter. The jobless rate is seen at 7.25 percent in 2020-21 before falling gradually to 5.5 percent in 2023-24.

Real GDP is forecast to fall by 3.75 percent in 2020 before recovering in 2021 to grow by 4.25 percent.

According to the budget 2020-21, the underlying cash deficit will widen to A$213.7 billion, but decline to A$112 billion next year and to A$87.9 billion in 2022-23.

Net debt is shown to increase to A$703 billion or 36 percent of GDP this year, and peak at A$966 billion or 44 percent of GDP in June 2024.

“This is a heavy burden, but a necessary one to responsibly deal with the greatest challenge of our time,” Frydenberg said.

The treasurer brought forward the stage two income tax cuts to July 2020 from July 2022. More than 7 million Australians receive tax relief of A$2,000 or more this year.

To kick-start investment, Frydenberg announced an instant asset write off for businesses with a turnover of up to A$5 billion. Over 99 percent of businesses will be able to write off the full value of any eligible asset they purchase for their business.

The treasurer unveiled a new JobMaker hiring credit to encourage businesses to hire younger Australians. The hiring credit will be available immediately to employers who hire those on JobSeeker aged 16-35.

For increasing home ownership and support jobs in the construction industry, he announced assistance for first time home buyers.

An additional 10,000 first home buyers will be able to purchase a new home sooner under First Home Loan Deposit Scheme, he said.

The budget also includes second Women’s Economic Security Statement, with A$240 million in measures and programs.

Marcel Thieliant, an economist at Capital Economics, said the income tax cuts and other stimulus measures unveiled in today’s Budget are estimated to provide fiscal support of around 2.5 percent of GDP in 2021/22.

That won’t prevent a major tightening in fiscal policy as the huge support provided during the pandemic tapers off, the economist added.

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Economy

RBA Keeps Monetary Policy Unchanged As Expected

Australia’s central bank retained its benchmark interest rate at a historic low and quantitative easing unchanged as expected ahead of the federal budget announcement later today.

The board of Reserve Bank of Australia, governed by Philip Lowe, decided to maintain cash rate and the targeted yield on three-year government bonds of 25 basis points.

The board also retained the parameters for the expanded Term Funding Facility.

The RBA had reduced the key interest rate to the current record low of 0.25 percent at the March meeting. Also in March, the bank had introduced asset purchase programme to combat the downturn caused by the pandemic.

The board viewed addressing the high rate of unemployment as an important national priority.

The RBA said that the unemployment rate is likely to peak at a lower rate than earlier expected. Nonetheless, unemployment and underemployment are set to remain high for an extended period. Wage and inflation pressures remained very subdued.

The bank reiterated that it will maintain highly accommodative policy settings as long as is required and will not increase the cash rate target until progress is being made towards full employment and it is confident that inflation will be sustainably within the 2-3 percent target band.

“The Board continues to consider how additional monetary easing could support jobs as the economy opens up further,” the bank said.

Marcel Thieliant, an economist at Capital Economics expects the RBA to cut the cash rate target, the 3-year yield target and the interest rate on the term funding facility to 0.1 percent at its November meeting.

The bank is also expected to announce additional purchases of government bonds in order to reduce long-term interest rates.

Policymakers observed that the national recovery is likely to be bumpy and uneven and it will be some time before the level of output returns to its end 2019 level.

Treasurer Josh Frydenberg is set to deliver the federal budget 2020-21 later today.

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Markets

Australia Fires Up Fiscal Policy in Race to Revive Employment

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Australia unveiled a multi-pronged fiscal plan that pushes its budget deficit to levels unseen in peacetime in a bid to power a recovery and generate jobs for tens of thousands left unemployed by Covid-19 containment efforts.


The underlying cash deficit will swell to A$213.7 billion ($153 billion), or 11% of gross domestic product, in the 12 months through June 2021, Treasurer Josh Frydenberg told parliament Tuesday. The jobless rate is forecast to peak at 8% later this year, a level last recorded 22 years ago amid the Asian financial crisis.

“This is a once-in-a-century shock that requires an unprecedented level of support,” Treasury said in its budget papers. “The government’s response is now transitioning to ensure the Australian economy recovers strongly by targeting additional temporary support measures to boost household incomes, bring forward business and infrastructure investment activity, and drive the unemployment rate back down.”

The right-leaning government has cast aside traditional fiscal restraint as it works to pull the economy out of its first recession in almost three decades. Australia entered the crisis relatively well placed to respond, with net debt standing at less than a quarter of GDP vs an average of over 80% in advanced G-20 economies.

“There is no economic recovery without a jobs recovery. There is no budget recovery without a jobs recovery,” Frydenberg told lawmakers. “This budget is all about jobs.”

Under its program, net debt will peak at 43.8% of GDP in June 2024 — from 24.8% last fiscal year — and the bond market will swell beyond A$1 trillion after July 1, 2021.

Spending measures include:

  • Bringing forward tax cuts scheduled for 2022 to July 1 this year that will see the threshold for the 32.5% rate lifted to A$120,000 from A$90,000
  • Allowing most firms to write off the full value of any eligible asset they purchase for their business; they can also offset losses incurred to June 2022 against profits made in or after fiscal 2018-19. Those two measures are expected to help create an additional 50,000 jobs
  • Together with what’s been announced since the onset of the crisis, the budget will see A$14 billion in new and accelerated infrastructure projects, estimated to support a further 40,000 jobs. Funding for “shovel ready” projects will be provided on a use-it-or-lose-it basis that means if one state delays, another will get the money, in order to inject urgency
  • A hiring credit paying A$200 a week to firms that take on an employee under 30 and A$100 for those aged 30-35
  • An expansion of assistance to first-home buyers to try to drive the labor-intensive residential construction industry
  • A Women’s Economic Security Statement including A$240 million for programs such as supporting women in science, technology, engineering and mathematics

“Australians will have more of their own money to spend on what matters to them,” Frydenberg said.

The Australian dollar was little changed, trading at 71.53 U.S. cents at 7:45 p.m. in Sydney.

Frydenberg is operating a two-stage fiscal plan as he tries to resuscitate growth, setting up a spending spree ahead of an election due by mid-2022. At that time, the government predicts unemployment will be 6.5%, while economists estimate it will still be around 7%.

Australia’s central bank is aiding the government’s largess by operating a bond-buying program keeping borrowing costs low across the economy and ensure the government can access funds at good rates. It kept policy rates unchanged earlier Tuesday, saying it continues to mull options and that addressing the high rate of unemployment is “an important national priority.”

Australia is assuming state border restrictions imposed to stem the spread of Covid-19 will be lifted by the end of 2020, bar Western Australia, which is assumed to open in April next year.

A gradual return of international students and permanent migrants is assumed late in 2021, Treasury said, with overseas travel expected to remain low through the period. With arrivals tumbling, net migration is set to swing to 72,000 people leaving Australia by June next year with a return to growth after that.

These are crucial factors for education and tourism, the fourth- and fifth-largest exports and major employers. In addition, the slump in migration is set to erode demand in the housing market.

High prices of the nation’s largest export, iron ore — as China deployed stimulus to re-energize its economy — has been a buffer for the local budget. The metal is currently trading well above $100, and Treasury is lowballing its forecasts, expecting it to be $55 by mid-next year.

The budget’s forecasts are based on the exchange rate remaining around its recent levels: a trade-weighted index of around 62 and around U.S. 72 cents.

— With assistance by Cynthia Li

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Categories
Business

Australia Hotspot Can Stop Local Cases Via Compliance, Officials Say

Australia’s state of Victoria has an opportunity to stop community transmission of Covid-19 if its residents stay the course on restrictions imposed on public behavior and social distancing, officials said.

The state had eight new cases in the last 24 hours and three deaths, Victoria’s Department of Health and Human Services said in a Twitter post on Saturday morning. The 14-day rolling average in metropolitan Melbourne dropped to 12.

Victoria has been the center of Australia’s coronavirus outbreak after security failures at quarantine hotels for returned overseas travelers led to a resurgence of community transmission. While a curfew in the state capital was lifted last week, limits on public gatherings of as many as five people still apply until Oct. 19 — although media recorded large groups of people not wearing masks at local beaches late Friday.

“Some of the scenes at beaches overnight are just unacceptable,” Premier Daniel Andrews told reporters. “It’s not smart and it’s not fair. If you want 2021 to be better than 2020 then we have to stay the course.”

Victoria and Australia are at a point where they can progress to a much more normal way of life as other nations tighten their rules amid worsening outbreaks, State Chief Health Officer Brett Sutton told reporters.

“Not every country has the opportunity to get to the point where they can effectively stop community transmission,” he said. “We are not there yet but we have that opportunity.”

Separately, New South Wales state officials reported zero locally transmitted cases for an eighth straight day.

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