Yin Huey Yeoh– Senior Industry Analyst

Australia 2020-21 Economic Outlook

Agenda:

• FY2019-20 recap• FY2020-21 outlook• Most Affected industries

• Tourism• Hospitality• Education

• Federal Government’s stimulus packages• Global economy

FY 2019-20

• 2019-20 GDP growth: -0.8%• ABS: Australia economy to decline by 0.3% in March 2020 quarter in seasonally adjusted terms

• Bushfires and early stages of COVID-19

• June 2020 Quarter: Treasury forecast decline by over 10.0% • Full impact of COVID-19

• Cash Rate: 0.25%

• Consumer Sentiment: 94.0 index points

• Business Confidence: average -7.7 index points

FY 2020-21 Outlook

Australian GDP Growth

• 2020-21 GDP growth: -1.0%• COVID-19 recovery

• Australia-China trade tension

• Expect GDP growth to pick up second half of 2020-21

• First recession in 29 years

• Federal Government’s 3 step COVID-safe roadmap

-2.0%

-1.0%

0.0%

1.0%

2.0%

3.0%

4.0%

5.0%

6.0%

1990 1995 2000 2005 2010 2015 2020 2025

US/Global Mini-Recession

SARS

GFC

COVID-19

Recovery

1990s Recession

Cash rate

• Currently cash rate at 0.25%

• 2020-21: 0.25%

• Negative cash rate

• Factors• COVID-19

• Business confidence

• Consumer sentiment

• Australia-China trade tension

0

1

2

3

4

5

6

7

8

2000 2005 2010 2015 2020 2025

Business Confidence

• 2019-20: Average -7.7 index points

• 2020-21: Average -6.7 index points

-20

-16

-12

-8

-4

0

4

8

12

16

2000 2005 2010 2015 2020 2025

COVID-19

GFC

rate• 2019-20: 5.45%

• 2020-21: 8.38%

• Unemployment rate temporarily contained by JobKeeper program

• Unemployment rate expected to peak in early 2020-21

4.00%

4.50%

5.00%

5.50%

6.00%

6.50%

7.00%

7.50%

8.00%

8.50%

9.00%

2000 2005 2010 2015 2020 2025

COVID-19

Unemployment Rate

Household disposable income

• 2019-20: -0.3%

• 2020-21: -0.7%

• JobKeeper stimulus package till September 2020

-2.0%

-1.0%

0.0%

1.0%

2.0%

3.0%

4.0%

5.0%

6.0%

7.0%

8.0%

2000 2005 2010 2015 2020 2025

Household consumption expenditure

• 2019-20: 0.6%• Projected to rise, but weak in historical

terms

• 2020-21: -0.6%• First decline in household consumption

expenditure in decades

-1.0%

0.0%

1.0%

2.0%

3.0%

4.0%

5.0%

6.0%

2000 2005 2010 2015 2020 2025

Consumer Sentiment Index

• 2019-20: 94.0 index points

• 2020-21: 94.8 index points

SARS

GFC

70

75

80

85

90

95

100

105

110

115

120

1991 1996 2001 2006 2011 2016 2021

1990s Recession

US/Global Mini-Recession

COVID-19

Sectors affected by COVID-19

Tourism Snapshot

• Travel ban has put significant pressure on Tourism industry• Airlines

• Hospitality

• Accommodation services

• China is the largest market in terms of expenditure

China34%

New Zealand7%

USA11%

United Kingdom9%

Japan6%

Singapore4%

India5%

Malaysia4%

Hong Kong4%

Others 16%

INBOUND TOURISM EXPENDITURE 2019$45.4 BILLION

International Travel

• 2019 – 20: Fall for the first time since 2008-09 GFC• Border closure

• 2020 – 21: 7.2% increase• Depends on when international travel

bans are lifted

• Australia-China trade tension, China issued travel warnings to Australia. However, Australia’s border remains closed.

• Trans-Tasman bubble -30.00%

-20.00%

-10.00%

0.00%

10.00%

20.00%

30.00%

2000 2005 2010 2015 2020 2025

Domestic Visitor Nights

• 2019 – 20: -16.8%• Severe bushfires

• COVID-19 state border closure

• Strict isolation measures

• 2020 – 21: 9.7% increase

-20.00%

-15.00%

-10.00%

-5.00%

0.00%

5.00%

10.00%

15.00%

2002 2007 2012 2017 2022 2027

Hospitality

• Hotels and Resorts• 2019-20: -23.8%• 2020-21: -19.3%• Inbound travel is anticipated to be restricted for a significant portion of 2020-21.

• Restaurants • 2019-20: -25.1%• 2020-21: 16.1%

• COVID-19 restrictions lifted

• Pubs, Bars and Nightclubs • 2019-20: -18.7%• 2020-21: -12.7%

Universities and Other Higher Education

• 2019-20: 1.5% increase

• 2020-21: Revenue and profitability to decline• Approximately ¼ revenue from

services provided to international students

• China’s Ministry of Education issues warning to reconsider study

China28%

India15%

Nepal7%

Brazil4%

Vietnam3%

Malaysia3%

South Korea3%

Columbia3%

Others34%

PERCENTAGE OF INTERNATIONAL STUDENTS

Government Measures

Coronavirus Economic Response Package

• $320 billion package, equivalent to 16.4% of GDP support

• JobSeeker supplement

• JobKeeper program

• Reskilling and upskilling the workforce

• Reliefs for Tenants and Landlords

• Temporary relief measures for financially distressed individuals and businesses

International Trade

Exports: Country of Destination

Country of final destination 2019 (AUD million) Percentage

Total Export Value 372,621

China, Peoples Republic of 134,158 36.0%

Japan 58,143 15.6%

Korea, Republic of 25,104 6.7%

India 19,095 5.1%

United States of America 14,327 3.8%

Taiwan 12,306 3.3%

Singapore 10,559 2.8%

New Zealand 9,892 2.7%

Others 89,037 23.9%

• 2020-21:-3.9%

• Highly exposed to China

• Australia-China trade tension • Barley

• Beef

• Tourism

• Education

Global Economy

Economic indicators

China

• GDP for first quarter of 2020 • 6.8% contraction, first contraction since 1976

• No GDP target for the first time

• Widespread shutdown of manufacturing, mining and utilities activity

• Total retail sales of consumer goods• First quarter of 2020: -19.0%

• Unemployment rate: 5.9%

Economic indicators

United States

• GDP estimated to decrease at an annual rate of 4.8% in the first quarter of 2020. This marks the end of 128 months expansion that began in June 2009.

• Unemployment rate: 13.3% in May 2020

• Pre COVID-19, the National Retail Federation issued its annual forecast, estimated retail sales to grow between 3.5% to 4.1%.

• In April 2020, Consumer spending tumbled a record 16.4%. For comparison, retail sales were down by just 2.2% in 2009

Thank You!