Reuters is reporting that payments on mortgages will be suspended across the whole of Italy after the coronavirus outbreak, Italy’s deputy economy minister said on Tuesday.
“Yes,
that will be the case, for individuals and households,” Laura Castelli
said in an interview with Radio Anch’io, when asked about the
possibility.
Italy’s banking lobby ABI
said on Monday lenders representing 90% of total banking assets would
offer debt moratoriums to small firms and households grappling with the
economic fallout from Italy’s coronavirus outbreak.
New Zealand banks are ready to respond to the impacts of
coronavirus, the Reserve Bank of New Zealand and New Zealand Bankers’
Association say.
The COVID-19 outbreak has
the potential to impact the operations of New Zealand’s banking sector by
affecting banks’ staff, their funding and their customers.
The Reserve Bank has asked
all banks about their risk management approaches and preparedness for COVID-19.
Reserve Bank Governor Adrian Orr said the responses show the banks are
prepared.
“Much of the banks’ focus
has been on staff health and safety, and their ability to sustain their
operations should the outbreak expand significantly. However, the banks are
also well attuned to any impacts on their customers’ businesses, employment,
and incomes,” Mr Orr says.
New Zealand Bankers’
Association chief executive Roger Beaumont says customers financially affected
by COVID-19, particularly small to medium sized businesses, are encouraged to
contact their bank.
Depending on the customers’ individual
circumstances potential options for support include:
Reducing or suspending principal payments on loans and temporarily moving to interest-only repayments
Helping with restructuring business loans
Consolidating loans to help make repayments more manageable
Providing access to short-term funding
Referring individual customers to budgeting services.
“Each bank will have their
own credit policies and approach to providing assistance. It’s important for
affected customers to talk to their bank as soon as possible. That gives banks
the best chance of offering assistance. Helping customers through any financial
stress depends on good two-way communication,” Mr Beaumont says.
The Reserve Bank team are in
regular dialogue with bank executives and are watching for signs of funding
market pressures or emerging signs of credit stress.
“While we have not seen any
significant pressures at this stage, we remain in regular contact with
stakeholders across the financial sector. At the Reserve Bank we are prepared
in our business continuity role to ensure a well-functioning financial system,
including enabling access to cash, ensuring sufficient liquidity in the banking
system, and managing a stable payments and settlements system,” Mr Orr says.
“All
businesses should be preparing for possible disruptions from COVID-19. Think
about how best to operate if staff are temporarily unavailable, or if suppliers
have restricted stock, cash-flows are interrupted, and sales decline in some sectors,”
Mr Orr says.
Australia’s fiscal stimulus package to protect the economy against the impact of the coronavirus may run as high A$10 billion. Via Bloomberg.
The Sunday Telegraph newspaper reported that the package was likely to be $5 billion while broadcaster Sky News said the stimulus could be up to
twice this amount. Australia is expected to reveal details of its plans
on Tuesday, when Prime Minister Scott Morrison and his Cabinet meet.
Governments around the world have already pledged more than US$54 billion in budget support to counter the virus’s impact. Morrison has yet to put a figure on his plan, which he has said will be “targeted, measured and scalable,” with an emphasis on protecting business cash flow and jobs.
Initial estimates of the
coronavirus’s impact from the nation’s Treasury and central bank suggest
the economy is likely to suffer a quarterly contraction
for the first time in nine years. For Australia, the blow is coming hot
on the heels of a summer of devastating wildfires that were already
expected to crimp growth.
While
the country had only reported 74 confirmed cases of the virus as of
Sunday, including three deaths, its economy is particularly exposed to
China, the center of the outbreak. China is Australia’s key market for
commodity exports and a vital source of tourists and students for the
services sector.
The Australian Financial Review reported the package may feature tax breaks to spur emergency investment by big businesses while the Australian newspaper said stimulus could include cash payments to households.
The
Sunday Telegraph report said the government was looking at wage
subsidies and payments for small businesses. It also said the government
may encourage pensioners to spend more by lowering the amount they are
allowed to earn from financial assets before receiving government
assistance
This week marks a new phase in the coronavirus crisis with the case count outside China accelerating sharply. Via The Conversation.
China’s containment strategy bought global
health authorities time to prepare, but failed to confine the outbreak
to North-East Asia.
In the past week both President Trump and
Prime Minister Morrison have prepared citizens for a rise in the onshore
case count in recognition of the likelihood the virus will spread to
most of the world.
Because it isn’t possible to shut down the
global trade and transport system without causing a global recession,
their strategy has shifted from containment to preparation.
It’ll be important to manage panic
Critical to the process is managing panic.
If consumers around the world substantially reduce their spending
either as a precautionary measure or in response to public health fears,
the impact on businesses will be substantial.
The key economic challenge will be to stop
a vicious cycle of weaker spending and job losses taking hold. Targeted
government spending can help businesses at risk, although some will use
it as an excuse to reset their cost base and scale down in an economic
environment that was challenging even before the coronavirus.
Global share markets have fallen 10% in a week as this new phase has begun to unfold, adding to uncertainty and fear.
Rate cuts are all but certain
Countries that have the capacity to cut
interest rates will do it. In the US, markets are expecting a cut at or
before the next meeting of the US Fed on March 17.
In Australia, markets are expecting a cut
of 0.25 points at the Reserve Bank’s board meeting on Tuesday. There is
some talk of a double cut, of 0.50 points, which would bring the Reserve
Bank cash rate down from 0.75% to 0.25%.
The cuts would be aimed at shoring up
confidence in the economy and financial markets as much as anything
else. Global rates are already low enough to provide economic stimulus.
It will be up to politicians to provide the targeted measures that will
be needed to help keep businesses afloat and people in jobs.
We’re facing a Chinese recession
The trade and travel restrictions in place
in and around China will have major ramifications. Estimates of the
impact of the containment policies on Chinese growth in the first
quarter of the year range from minus 2% to minus 10%, enough to
obliterate growth in the world’s fastest-growing big economy.
A shocking Chinese purchasing managers’ index reading on the weekend showed a fall to a new low not reached during the global financial crisis.
Few countries are as exposed to Chinese purchasing as Australia.
Australia gets GDP figures on Wednesday
for the final three months of 2019. These are likely to show the economy
grew by less than 0.5% in the quarter.
Most of the impact of the bushfires and
the initial impact of the coronavirus will show up in the data for the
first quarter of this year. Many analysts have pencilled in a negative
number.
And possibly an Australian recession
It will leave Australia exposed to what is
known as a technical recession – two consecutive quarters of negative
economic growth, in the three months to March and the three months to
June.
This possibility, Australia’s first recession in 29 years, will depend on how we react to the emergence of coronavirus onshore.
The initial reaction might paradoxically
support measured economic growth as people stockpile supplies. The next
phase would be a reduction in spending as people avoid leaving their
homes. As we are seeing in China, and more recently in Korea and Italy,
shopping districts can become ghost towns.
It would be akin to a nationwide rise in
saving, which drains consumer spending and business activity. Beyond
efforts to maintain perspective and keep calm, little can be done to
prevent people from willingly choosing to remain at home.
We’ll need targeted, clever, government support
It is in this phase that government policy
actions will be critical. A mild technical recession caused by an
external shock would be undesirable but need not be a disaster for the
community if the employment ramifications can be minimised.
Government efforts need to be directed at
stopping a negative shock evolving into a self-reinforcing spiral of
declining spending and lower employment.
Lower interest rates will be of very
little use to start with. Governments will need to target support to
those parts of the economy most under stress with the greatest risk of
job losses.
The challenge will be to identify those businesses at the greatest risk of insolvency.
The Reserve Bank board will need to follow
the lead of the US Federal Reserve and at least issue a soothing
statement to financial markets that it is ready to act if needed.
If it is too early to gauge the impact of
this new phase of contagion of the coronavirus, it is really too early
for rate cuts. And there is a risk that a rate cut this week might
generate more panic and amplify the effects of any consumer and business
panic already upon us.
At most, the bank can support the government. It is our leaders who will bear the biggest responsibility for steering us through what’s to come.
Author: Warren Hogan, Industry Professor, University of Technology Sydney
Another chat with Journalist Tarric Brooker covering finance and politics. Tarric uses the handle @AvidCommentator on Twitter.
We discuss the latest economic and political dynamics as the RBA considers a rate cut tomorrow, and central banks around the world seek to support their financial markets. How might this play out?
Jerome Powell just issued this “don’t panic” message.
The fundamentals of the U.S. economy remain strong. However, the coronavirus poses evolving risks to economic activity. The Federal Reserve is closely monitoring developments and their implications for the economic outlook. We will use our tools and act as appropriate to support the economy.
The calls from the markets for central bank intervention and fiscal stimulus are rising fast. However, this could well be finger in the dyke stuff….
Salvatore Babones, Adjunct Scholar at the Centre for Independent Studies, and Associate Professor University of Sydney joins me to discuss the latest indicators relating to China, as the current crisis plays out.
Last week we ran our latest live event, and discussed a range of potential scenarios relating to the virus. If the virus is localised and of short duration, there was still a path to higher prices, but as its severity and reach grows, prices would turn negative. This is a simple (actually complex) set of relationships between economics, human behavior and property.
Here is a summary of the various scenarios from our modelling. We weighted the greatest probability at 30-45% fall in the months ahead, assuming global disruption, financials market falls and reinfection. All of which is coming true.
Begs the question, how soon will prices turn south unequivocally?
