What is the likely fall-out from COVID-19

Well from a health perspective I am not qualified to comment, but I can say from an economic perspective the fallout is uncertain, and varies from country to country. From my 30 plus years of experience in investment markets and advice I feel that in Australia we have handled the situation very well, and that our Prime Minister and his advisers should be congratulated. However, it was interesting to see Professor Levitt from Stanford University saying that Australia is a “standout loser” for “massively” damaging our economy beyond the “saving of lives”. He also stated that we have also damaged our society, harmed the education of our children, whilst not obtaining any herd immunity. I know in hindsight from my time studying Global Economics at Harvard Business School during the GFC that academics are not always right, so I’m not convinced. Professor Levitt’s specialty is structural biology, and he has won a Nobel Prize, so his view should be respected, but only time will tell if he is right or not.

How will this impact our economy?

The Reserve Bank of Australia has indicated that our economy will shrink by 10 per cent this year, and it remains to be seen whether the federal government’s $214bn stimulus spending will curb the damage to business caused by the lockdown. Many sectors will not be able to recover and, other than Virgin, we really haven’t seen the start of the business closures, insolvencies, and individual bankruptcies yet. The real concern though is what is happening in the US, the UK and Europe. Their economies are much larger and the health impact is more severe as they haven’t been able to ‘flatten the curve’ like we have done in Australia. Whilst it is almost certain that we are in a recession right now, it is these western nations, combined with the emerging market countries that may be in deep recessions for many years. This combination will not doubt weigh on our economy and pose a risk for many domestic and global investments.

Peter Lanham
BCom DipFP CPA CFP CFS JP
Authorised Representative (No. 224334)
Chief Executive/Financial Strategist
Lanham Financial Advice

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