Macro snapshot: 9 Sep 2020

As I have mentioned before I have to provide my company's board with frequent updates in relation to the local economy including a qualitative section which is stitched together from publicly available information. Given it's public information it's not classified as confidential so I can share it.

I'm not sure if you guys find this useful so let me know if you want to see this more frequently. From a BNPL perspective the continuing decline in credit card balances is interesting and so is the increase in consumer confidence, noting that the surveys were done prior to the Victorian lock down extensions. Consumer confidence in particular is interesting as it suggests that consumers are reasonably confidence about their current financial position which is also supported by an increase in credit card balance repayment, a feat that couldn't be done by a population that's in crisis mode. Also worth noting is that GDP forecasts by the RBA, Moody's and Fitch suggest the biggest impacts to GDP were in Q1 and Q2 2020 and should start picking up again, with a strong rebound in 2021.

The below extract is unbiased and keep in mind this is written to a board for a financial institution hence it's focus:

RBA: Credit card debt continues to trend lower through COVID-19 crisis
On 7 September 2020 the Reserve Bank of Australia (RBA) released the latest Retail Payments report which showed that balances accruing interest in personal credit and charge cards fell 5.7 per cent from $22.7bn in June to $21.4bn in July. Balances accruing interest have fallen more than 20 per cent since January 2020 and are at their lowest level since 2005.
The average balance accruing interest on a personal credit card account in July was $1,633 lower than the $1,981 average balance in July last year. In the commercial credit and charge card market, balances accruing interest fell 7.9 per cent from $1.05bn in June to $971m in July. Balances accruing interest on commercial cards have fallen around 24 per cent since January and are now at their lowest since 2009.
The volume of transactions on personal cards has picked up over the past few months, as has the value of transactions, but this has been more than offset by repayments. The number of personal credit and charge card accounts was 13.1m in July and the number of commercial accounts was 816,000, both at the lowest levels since 2008.
Meanwhile, use of debit card accounts continues to grow. The number of purchases using debt increased by 7.3 per cent to $714.9m, compared with the previous month, and the value increased by 10.4 per cent to $35.2bn. Since the start of the year, the value of debut card purchases has grown by 22 per cent.

Consumer and Business Confidence
ANZ-Roy Morgan Consumer Confidence
On 8 September 2020 the latest ANZ-Roy Morgan survey showed consumer confidence rose 1 per cent last week, led by improved confidence in ‘future economic conditions’ and ‘time to buy major household items’. ANZ Head of Australian economics David Plank noted that people are much more negative about the near-term economic outlook, however, they are positive about their own ‘current financial conditions’. However, this survey was completed before news of Victoria’s lockdown extension and recovery roadmap.
Westpac-Melbourne Institute Index of Consumer Sentiment
On 9 September 2020 the September index rose 18 percent to 93.8 from 79.5 in August despite official confirmation in the survey week that Australia had entered into a recession. Westpac Chief Economist Bill Evans said “Clearly this was old news with respondents more focussed on the future”. The rebound means the index is now just 1.6 per cent below the average over the six months prior to the emergence of COVID-19 in March. This survey was also completed before news of Victoria’s lockdown extension and recovery roadmap.  “The disappointment with that announcement could have been expected to dampen the 14.9 per cent surge in confidence in Victoria, although frustration at the extended lockdown measures would likely still be more than outweighed by the clear success they have had in containing the virus,” Mr Evans said.
NAB Business Confidence
According to NAB’s latest business confidence survey released on 8 September 2020 Australian business confidence improved 6 points to -8 index points after falling 14 points in August. Confidence remains negative in all states except Queensland and Tasmania and is weakest in Victoria despite a notable pickup in the month.
Business conditions slipped in August falling 6 points in August to -6 index points. According to NAB’s Group Chief Economist Alan Oster, conditions went backwards following a strong rebound in recent months. The weakness was primarily driven by a deterioration in the employment index – suggesting that while the economy has generally begun to open up, the labour market is still weakening,” Mr Oster said.

Fitch: Downgrades Australian growth outlook on Victorian lockdown
On 8 September 2020 rating agency Fitch downgraded expectations for Australian economic growth this year due to Victoria’s strict lockdown regime. Fitch lowered its GDP forecasts for Australia for 2020 by 0.9 percentage points from its June forecast and is now tipping the economy to contract by 3.6 per cent this year.
Consumer spending is forecast to be down 8.8 per cent in 2020 while fixed investment is tipped to be down by 3.8 per cent. After the June quarter’s 7 per cent GDP contraction, Fitch believes the economy will grow a modest 0.4 per cent in the September quarter, held back by the events playing out in Victoria.
The situation is better for 2021, with Fitch tipping the economy to expand by 3.9 per cent. Fitch noted that household sector spending should benefit from a very accommodative macro policy stance, which is shoring up household income.  
Fitch also believes the RBA will have official interest rates at 0.25 per cent over the forecast horizon while continuing its yield curve control policy. Global growth is tipped to fall by 4.4 per cent this year before bouncing back to 5.2 per cent in 2021. China and emerging nations are expected to be the key drivers of growth next year.
Fitch’s downgrade comes after Moody’s downgraded Australia’s economic outlook in August also singling out Victoria’s lockdown as the main reason. Moody’s increased the 2020 GDP contraction from 4.9 per cent to 5.3 per cent but tipped a stronger recovery in 2021, upgrading growth from 3.7 per cent to 4.3 per cent.