December 1, 2020

AMW: Making a molehill out of a fiscal cliff?

Treasurer Frydenberg today stated JobKeeper numbers have more than halved from a peak of 3.6m, to now just 1.5m as at 26 November.

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  • Treasurer Frydenberg yestertoday stated JobKeeper numbers have more than halved from a peak of 3.6m, to now just 1.5m as at 26 November. Those on unemployment benefits (JobSeeker) have also steadily fallen from a peak of 1.5m to 1.3m as at 31 October. Importantly this tapering of government support is occurring at a time where there continues to be a sharp pick-up in economic activity.
  • We noted back in July the tapering of government support “does not need to derail the recovery if containment restrictions continue to be eased and business activity picks up as we have seen recently in the high frequency data” (see AMW: JobKeeper and JobSeeker, what happens come September?). This scenario appears to be playing out with virus control allowing the pick-up in activity at a time of reduced fiscal support (a mixed metaphor, households are making a ‘molehill out of a fiscal cliff’).
  • Encouraging news on vaccine trials suggests the medium-term outlook for growth will continue to improve. This theme is evident in stock markets on either side of the Atlantic. NAB recently revised its forecasts for growth and sees some prospect that the unemployment rate may already have peaked at around 7%. Job advertising which has frequently signalled turning points and the trend in the unemployment rate, suggests a risk (though not NAB’s central view) that the unemployment rate could drop more quickly than expected.

The week ahead


The RBA and Q3 GDP figures dominate the week. The RBA Board meets on Tuesday and Governor Lowe gives Parliamentary Testimony on Wednesday. While the RBA only recently eased policy, a run of better than expected data now has markets asking what happens in five months when the $100bn QE program expires – will it be a hard stop given the pick-up in the data and would this have any implications for the 3yr YCC program?

Datawise Q3 GDP figures are out Wednesday where NAB looks for an above consensus 4.1% q/q rise after last quarter’s sharp 7% contraction. There is a wide range on the consensus for GDP (range 0.5-4.1%; median 2.4%) which may narrow after Net Exports/Government Spending on Tuesday.

Also out in the week are on Tuesday, Trade Balance and Housing Finance on Thursday, and final Retail Sales on Friday.


Vaccine hopes dominate with talk of fast-track approval of the Pfizer/BioNTech vaccine in the UK by December 7, and in the US soon after that. Accordingly, markets may become less sensitive to any data misses in what is a big week for data.

US: Payrolls are on Friday with consensus +500k and for the unemployment rate to tick down a tenth to 6.8%.

The ISMs are also out on Tuesday and Thursday.

Fed Chair Powell is speaking before the Senate and House on Tuesday and Wednesday, having already steered markets toward a QE twist announcement at the upcoming December FOMC meeting.

UK/EU: the press report a UK-EU trade deal may be finalised this week, while the Euro area has a flash read on inflation on Tuesday.

Chart: Australian data has surprised sharply to the upside over recent weeks

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