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3 Minute Economic Summary: September – October 2020

Article By Rebecca Stewart | | Financial Planning
  • Markets were volatile over the month of September with key contributors being a surge in COVID-19 cases, the US presidential election speculation and expensive valuations across technology stocks (which led to a correction). Markets have been improving over the month of October, particularly in Australia on the back of the Federal Government’s Annual Budget.
  • The Australian Government announced further stimulus measures aimed at regrowing the economy through job creation and increasing consumer spending. A key measure was the bring-forward of progressive tax cuts for individuals which were slated for 2022.
  • The RBA has kept the cash rate unchanged at a record low of 0.25%, although it is highly anticipated that the cash rate will drop to 0.10% after the November 3rd meeting. This would help make borrowing cheaper for the Government, businesses, and households.
  • The unemployment rate has decreased slightly to 6.9%. Despite the high figure, unemployment has been better than expected. A risk to the Australian economy is that high unemployment leads to a longer-term recession. The next six-months will paint a clearer picture on unemployment rates as Job Seeker and Job Keeper payments are phased out.
  • In the US, the presidential election is just 1 week away. Polls currently have Democratic nominee Joe Biden marginally in front of Republican incumbent Donald Trump. The US continues to struggle with COVID-19 cases, which is affecting the country’s economic recovery.
  • The reversal of lockdowns in Asia continues to kickstart economic activity as people return to shops and go back to work. The outlook for Asia is positive as a result of low valuations and the recovery of COVID-19 compared to the rest of the world.
  • In China, the Government announced a “dual circulation” strategy aimed at reducing its dependence on overseas markets and technology in its long-term development. Ongoing tensions with the US have exposed China’s vulnerability as it relies heavily on high-tech products from the US. The Chinese Government hopes to spur domestic innovation leading to domestic supply chains.

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