Coronavirus Shutdowns Ahead

According to the New Daily, Victoria to close schools and NSW is to shut restaurants, and pubs; and cross-border controls will be in place.

Australia is fragmenting as the coronavirus sees state borders closed and premiers embrace sweeping lockdowns.

In what is confirmation Australians must prepare to face the country’s most extreme virus safety measures to date, NSW Premier Gladys Berejiklian has declared non-essential services will shut down within 48 hours.

Victoria also confirmed just before 3pm Sunday (local time) that schools would shut on Tuesday and there will be progressive closures of businesses such as pubs and restaurants.

Schools in NSW will remain open on Monday, but the premier is likely to make further announcements on education in the days to come.

ACT Chief Minister Andrew Barr announced that the territory would follow the lead of NSW as it was “impossible” to have different arrangements from the surrounding region.

Victorian Premier Daniel Andrews made a similar announcement to the NSW premier, confirming “non-essential” services will be forced to close.

“This is not something that we do lightly,” Mr Andrews said.

“But it’s clear that if we don’t take this step, more Victorians will contract coronavirus, our hospitals will be overwhelmed, and more Victorians will die.”

Supermarkets, petrol stations, pharmacies, convenience stores, and freight service – including home delivery of food – will remain open across Victoria and NSW.

Victorian Premier Daniel Andrews released this statement on Sunday afternoon.

Political leaders are meeting on Sunday night to consider urgent powers that would see citizens banned from travelling between suburbs and in between so-called COVID-19 “red zones”.

“Tonight I will be informing the National Cabinet that NSW will proceed to a more comprehensive shutdown of non-essential services,” Ms Berejiklian said in a statement.

“This will take place over the next 48 hours.”

NSW Health on Sunday confirmed 97 new COVID-19 cases, bringing the state’s tally to 533.

Authorities have still not been able to work out the source of infection for 46 of those cases, but they do know those people became infected within Australia.

The NSW Premier confirmed the strict rules would be rolled out in the next 48 hours.

Victorian cases jumped by 67 overnight and the government confirmed there had been outbreaks in regional areas including Warrnambool and the Surf Coast.

The call to shut down schools goes against the advice from the federal government.

Prime Minister Scott Morrison persisted with the message for the past week that the health advice was that it was best to keep children at school.

The advice from the PM caused widespread confusion among teachers and parents, with many questioning why Australians were told to ‘social distance’ yet send kids to class.

The call by Mr Andrews makes Victoria the first state to officially close classroom doors to stop the spread of coronavirus.

Children in other nations have already stopped going to school.

The Victorian government said it was bringing forward the school holidays.

It remains to be seen whether the ban on physical class attendance will extend into term two.

Meanwhile, South Australia has confirmed it will effectively close its borders in a bid to stop the spread of COVID-19 following an outbreak within a group of tourists travelling around the Barossa Valley.

Premier Steven Marshall announced on Sunday that anyone entering the state would be subject to a mandatory 14-day isolation period.

The measures will take effect from 4pm on Tuesday.

“The health of South Australians is unquestionably our No.1 priority and that is why we are acting swiftly and decisively to protect them from the impact of this disease,” he said.

“We do not make this decision lightly but we have no choice”.

South Australia’s borders will be monitored 24 hours a day and anyone entering the state will be forced to sign a declaration agreeing to self-isolate.

State authorities moved to declare a “major emergency” on Sunday, triggering the shutdown.

But Police Commissioner Grant Stevens admitted authorities were limited in their ability to enforce the isolation orders.

SA Police have been checking on those who have already been ordered to self-isolate after disembarking international flights.

He said authorities were “relying on people’s community and sense of goodwill to do the right thing”, and that overwhelmingly people had been complying with orders.

Similar restrictions have been put in place in Tasmania and the Northern Territory.

In the NT, there are major fears for indigenous communities.

Shields Up: Second Stimulus Package Worth $66bn But Only 13% Total To Date For Households

The Prime Minister And Treasurer released their second stimulus package today which is designed to shield the country from the current emergency, and to keep businesses from collapsing for at least the next 6 months. But a warning, watch how the RBA measures have been rolled into the total support now valued at $189 billion. This is deceptive. They want to make it look like a big number. It is not, yet!

In summary, small businesses can receive cash payments up to $100,000 and some welfare recipients will receive another $750 in payments, as Newstart is repurposed temporarily.

It builds on the measures included in the first $17.6 billion economic stimulus package announced more than a week ago.

ScoMo said “We cannot prevent all the many hardships, many sacrifices that we will face in the months ahead.

He made the point that the health-related issues are leading to a range of broader economic issues, as never before. The total packages are now worth around 9.7% of GDP – or around $189 billion dollars, and Treasury modelling indicates benefits to the national accounts in the June and September quarters to offset the big falls elsewhere. No one knows where results will land. But within that, $90 billion reflects the RBA’s liquidity injections, so the true Government direct support is much lower than advertised.

The UK initiatives, we recently discussed were 15% of UK GDP, so we are still doing things on the cheap in my view. More direct support for households needs to come.

The new measures include:

  • Temporarily doubling the Jobseeker Payment, previously called Newstart
  • Allowing people to access $10,000 from their superannuation in 2019-20 and 2020-21
  • Guaranteeing unsecured small business loans up to $250,000
  • Reducing deeming rates by a further 0.25 per cent

A second $750 payment will be automatically paid to an estimated 5 million people on July 13 on welfare. The first $750 payment, announced in the first stimulus package, will be paid on March 31.

The Government will temporarily double the Jobseeker Payment, previously called Newstart, providing people with an additional $550 a fortnight.

The payment will be available to sole traders and causal workers, provided they meet income tests. The Government will waive asset tests and waiting periods to access the Jobseeker Payment.

The Prime Minister said that “the nature of these payments and the purpose of these payments are changing.” to provide additional income support for vulnerable groups.

For small businesses and Not-for-profits with a turnover under $50 million can receive a tax-free cash payment of up to $100,000, with a minimum payment of $20,000 for eligible companies.

The Government says 690,000 businesses employing 7.8 million people and 30,0000 not-for-profits will be eligible for measures in the stimulus package. The payments will be delivered by the Tax Office as a credit on activity statements from late April.

In an agreement with the banks, the Commonwealth is also offering to guarantee unsecured loans of up to $250,000 for up to three years to businesses, interest free for 6 months.

In response the CBA said “The Commonwealth Bank will support as many of the Government supported loans as possible and in doing so make available up to $10 billion of additional unsecured credit to support small and medium businesses.” The ABA welcomed the move saying ” Banks stand ready to help their business customers get through this, whether it’s deferring their loan payments or providing more working capital.  Today’s announcement of a second stimulus package, which includes an SME Guarantee scheme, will mean access to funds to see small businesses through this downturn”. 

The Government will allow people to access up to $10,000 from their superannuation this financial year and in 2020-21.

People will not pay tax on they money they access and withdrawals will not affect Centrelink or veterans’ payments.

There will also be a temporary 50-per-cent reduction in superannuation minimum drawdown requirements for account-based pensions in 2019-20 and 2020-21.

On top of the deeming rate changes made at the time of the first package, the Government is reducing the deeming rates by a further 0.25 percentage points to reflect the latest rate reductions by the RBA. As of 1 May 2020, the lower deeming rate will be 0.25 per cent and the upper deeming rate will be 2.25 per cent. The change will benefit around 900,000 income support recipients, including Age Pensioners. This measure is estimated to cost $876 million over the forward estimates period.

The Government is moving quickly to implement this package. To that end, a package of Bills is being introduced into Parliament on 23 March 2020 for urgent consideration.

Subject to passage of the Bills through Parliament, the Government will then move to immediately make, and register, supporting instruments.

The National Cabinet will meet tonight to find a way to force Australians to adhere to social distancing, following the temporary closure of Bondi Beach after people failed to adhere to government spacing requirements.

There were clear signals of more draconian measures should people not keep their distance. The Government also said not to travel unless it was essential. Reality is slowly catching up with the community, but many are still looking the other way.

Auction Results 21 March 2020

Mark you diary. This just might be last results for some time. I attended (socially distanced) three house auctions today. Not one buyer turned up for any of them and the auctioneer went away tail between legs. These were premium properties which a few days ago I think would have sold.

That said, Domain released their preliminary results for today. The numbers sold appear down a bit (despite the media hype I noted saying there was frenzied buying parallel to toilet paper!). There were more listed for sale than last week.

Sydney listed 776 auctions, reported on 495, with 388 sold, 107 withdrawn and 107 passed in (weird coincidence) This gives a Domain clearance of 64%. [Last week final was 67%]

Melbourne listed 1,184 auctions, reported on 827 with 537 sold, 46 withdrawn and 290 passed in to give a Domain clearance of 62%. [Last week’s final was 65.2%]

Canberra listed 56 auctions, reported 38 and sold 26, with 2 withdrawn and 12 passed in, giving a Domain clearance of 65%.

Brisbane listed 95 auctions, reported 37 and sold 18, with 9 withdrawn and 19 passed in giving a Domain clearance of 39%.

Adelaide listed 47 auctions, reported 28 with 19 sold, 1 withdrawn and 9 passed in to give a Domain clearance of 66%.

UK To Support Employee Wages Direct

The UK has taken unprecedented actions to support households and businesses. It will be interesting to see what the Australian Government comes out with when they announce theirs. The UK is providing wages support, rental support, and more support for the small business sector.

Capital Economics said that it expected the unemployment rate to rise from just under 4% to about 6% due to the crisis. However, without this latest government intervention, that rate would have risen to the financial crisis level of 8%.

The UK Government has announced a new Coronavirus Job Retention Scheme. Any employer in the country – small or large, charitable or non-profit – will be eligible for the scheme. But it does not cover those on zero hours contracts, or are self employed.

Government grants will cover 80% of the salary of retained workers up to a total of £2,500 a month – that’s above the median income. Employers can top up salaries further if they choose to.

Employers will be able to contact HMRC for a grant to cover most of the wages of people who are not working but are furloughed and kept on payroll, rather than being laid off.

The Treasurer said “that means workers in any part of the UK can retain their job, even if their employer cannot afford to pay them, and be paid at least 80% of their salary”.

The Coronavirus Job Retention Scheme will cover the cost of wages backdated to March 1st and will be open initially for at least three months – and I will extend the scheme for longer if necessary.

There is no limit on the amount of funding available for the scheme.

In addition he announced that the Coronavirus Business Interruption Loan Scheme will now be interest free for twelve months, not 6 months.

And a further cash flow support through the tax system for businesses was announced, buy deferring the next quarter of VAT payments.

That is a direct injection of £30bn of cash to employers, equivalent to 1.5% of GDP.

They will be launching in the coming days a major national advertising campaign to communicate the available support for businesses and people.

To strengthen the safety net, the Universal Credit standard allowance, for the next 12 months, will be lifted by £1,000 a year, as well as increasing the Working Tax Credit basic element by the same amount

Together these measures will benefit over 4 million of our most vulnerable households.

As a result, every self-employed person can now access, in full, Universal Credit at a rate equivalent to Statutory Sick Pay for employees.

Taken this amounts to nearly £7bn of extra support through the welfare system to strengthen the safety net and protect people’s incomes.

UK homeowners can get a three-month mortgage holiday if they need it.

They also announced nearly £1bn of support for renters, by increasing the generosity of housing benefit and Universal Credit, so that the Local Housing Allowance will cover at least 30% of market rents.

They called these actions “an unprecedented economic intervention to support the jobs and incomes of the British people”.

Further measures will be announced next week, to ensure that larger and medium sized companies can also access the credit they need.

He said “we want to look back on this time and remember how, in the face of a generation-defining moment, we undertook a collective national effort – and we stood together”.

Fed Supports Liquidity Of US State and Municipal Money Markets

The Federal Reserve Board on Friday expanded its program of support for the flow of credit to the economy by taking steps to enhance the liquidity and functioning of crucial state and municipal money markets. Through the Money Market Mutual Fund Liquidity Facility, or MMLF, the Federal Reserve Bank of Boston will now be able to make loans available to eligible financial institutions secured by certain high-quality assets purchased from single state and other tax-exempt municipal money market mutual funds.

All U.S. depository institutions, U.S. bank holding companies (parent companies incorporated in the United States or their U.S. broker-dealer subsidiaries), or U.S. branches and agencies of foreign banks are eligible to borrow under the Facility.

Collateral that is eligible for pledge under the Facility must be one of the following types:

  1. U.S. Treasuries & Fully Guaranteed Agencies;
  2. Securities issued by U.S. Government Sponsored Entities;
  3. Asset-backed commercial paper that is issued by a U.S. issuer, is rated at the time purchased from the Fund or pledged to the Reserve Bank not lower than A1, F1, or P1 by at least two major rating agencies or, if rated by only one major rating agency, is rated within the top rating category by that agency;
  4. Unsecured commercial paper that is issued by a U.S. issuer, is rated at the time purchased from the Fund or pledged to the Reserve Bank not lower than A1, F1, or P1 by at least two major rating agencies or, if rated by only one major rating agency, is rated within the top rating category by that agency; or
  5. U.S. municipal short-term debt that: i.Has a maturity that does not exceed 12 months; and ii.At the time purchased from the Fund or pledged to the Reserve Bank: 1.If rated in the short-term rating category, is rated in the top short-term rating category (e.g.,rated SP1, MIG1, or F1, as applicable) by at least two major rating agencies or if rated by only one major rating agency, is rated within the top rating category by that agency; or 2.If not rated in the short-term rating category, is rated in the top long-term rating category (e.g., AA or above) by at least two major rating agencies or if rated by only one major rating agency, is rated within the top rating category by that agency.
  6. In addition, the facility may accept receivables from certain repurchase agreements. The facility at this time will not take variable rate demand notes or tender option bonds, but the feasibility of adding these and other asset classes to the facility will be considered in the future.Rate: Advances made under the Facility that are secured by U.S. Treasuries & Fully Guaranteed Agencies or Securities issued by U.S. Government Sponsored Entities will be made at a rate equal to the primary credit rate in effect at the Reserve Bank that is offered to depository institutions at the time the advance is made.

Advances made under the Facility that are secured by U.S. municipal short-term debt will be made at a rate equal to the primary credit rate in effect at the Reserve Bank that is offered to depository institutions at the time the advance is made plus 25 bps.

More Coordinated Central Bank Action

The Bank of England says

The Bank of Canada, the Bank of England, the Bank of Japan, the European Central Bank, the Federal Reserve, and the Swiss National Bank are today announcing a coordinated action to further enhance the provision of liquidity via the standing U.S. dollar liquidity swap line arrangements.

To improve the swap lines’ effectiveness in providing U.S. dollar funding, these central banks have agreed to increase the frequency of 7-day maturity operations from weekly to daily. These daily operations will commence on Monday, March 23, 2020 and will continue at least through the end of April. The central banks also will continue to hold weekly 84-day maturity operations.

The swap lines amongst these central banks are available standing facilities and serve as an important liquidity backstop to ease strains in global funding markets, thereby helping to mitigate the effects of such strains on the supply of credit to households and businesses, both domestically and abroad.

The same information appeared on other Central Bank web site too.