Valerie MedlevaIt has now been a few months since the novel coronavirus pandemic took the global headlines by storm. From China to South Africa to the US, the entire world is experiencing the shockwaves the disease has sent through the nations, with many countries posting underwhelming statistics on the battle against Covid-19.
However, a small glimpse of hope is seen across the oceans where one country has found its way to successfully curb the spread of the illness, with the number of new cases dwindling every day. At the time of writing, April 20, Australia had reported just over 6,600 cases of the fatal virus. While the figure is not a happy one, it is still optimistic when compared to the rest of the world.
On Monday, April 20, the country had only 13 new Covid-19 cases. Queensland recorded no new cases for the first time since March 9, while in New South Wales – the hardest-hit state with 2,963 infections – only six new cases were diagnosed. There have been more than 70 coronavirus deaths across the nation, but over 4,200 patients have already recovered.
Do those figures mean Australia is set to recover the quickest after the pandemic is over? Now that we are living in times of deep uncertainty, could it become a safe haven in the financial markets that many investors are desperately looking for?
In this article, we try to answer those questions by checking out the latest news, recapping analysts’ forecasts on the Australian economy outlook and reviewing some of the best Australian shares to invest in right now.
Detailed insight: what is happening to the Australian economy today?
Australia is known for its "miracle economy" that avoided recession during the infamous financial crisis of 2008 and dodged the bottoms of the 1997 Asian financial crisis. But how is the Australian economy performing in 2020?
Today, for many in the country, the recent bushfire catastrophe seems a distant memory as the coronavirus takes the nation deeper into the unknown. While the Black Summer fires added to escalating economic turbulence, the deadly disease has led to inevitable collapse.
The Covid-19 outbreak has delivered a hammer blow to Australia’s economy, with restaurants, airlines and hotels losing customers and cash due to travel bans, social distancing, office closures and other measures for preventing the spread of the virus. In one week, almost one million Australians lost their jobs. According to the latest reports, the unemployment rate is set to double to 10 per cent by mid-year.
On March 30, the government unveiled Australia's biggest ever economic package of A$130 billion ($80 billion) to keep six million people in jobs, bringing the government’s total support for the economy to an estimated A$320 billion ($200 billion).
Australian economy forecast 2020: what lies ahead?
Currently, the Australian economy outlook remains anything but optimistic. Economists across the board now predict a recession, adding that it is just a question of how bad it gets and how long it lasts.
Investment bank UBS (UBSG) provided a few detailed scenarios of the virus’s effect on the economy. In one of them, coronavirus infections peak in June, and the economy quickly starts to recover. In this case, economic growth will be 0.5 per cent for the year, house prices will drop 5 per cent and airline traffic will return to normal by next July.
Another, the worst scenario, sees infections peak in September, with the economy going backwards for the entire year and contracting by 0.4 per cent. House prices will then drop by up to 20 per cent and airline traffic will suffer for another year or two. Unemployment rate will remain high, with wages staying static or even falling lower.
Philip Lowe, a Governor of the Reserve Bank of Australia, said that in 2020, the country is likely to experience its biggest contraction in national output since the Great Depression. During his speech in Sydney, he warned: "The next few months are going to be difficult ones for the Australian economy. Over the first half of 2020 we are likely to experience the biggest contraction in national output and income that we have witnessed since the 1930s.”
He added: “Putting precise numbers on the magnitude of this contraction is difficult, but our current thinking is along the following lines … National output is likely to fall by around 10 per cent over the first half of 2020, with most of this decline taking place in the June quarter ... The unemployment rate is likely to be around 10 per cent by June.
However, Lowe reminded Australians that this period will pass and that “a bridge has been built to get us to the other side. With the help of that bridge, we will recover and the economy will grow strongly again … We need to remember that once the virus is satisfactorily contained, all those factors that have made Australia such a successful and prosperous country will still be there."
With the economy expected to suffer, at least in the short term, many investors are now wondering: “What is happening to the Australian share market and where to invest now?”
Australian stock exchange: more losses yet to come?
According to the latest Australian stock exchange news, many of the country’s equities are now experiencing severe implications brought by the ongoing pandemic.
On Tuesday, April 21, Australian stocks closed at a near two-week low as fears of significant economic damage deepened after Lowe’s comments. The ASX 200 Index shed 131.70 points, or 2.5 per cent, to end the day at 5,221.30, its lowest close since April 8.
A historic drop in crude prices overnight dragged energy stocks lower, with heavyweights Santos (STO) and Woodside Petroleum (WPL) losing 2.9 per cent and 1.3 per cent respectively.
The virus also severely hit Australia’s second-biggest airline Virgin Australia Holdings (VAH). On Tuesday, the company announced it had entered voluntary administration after the country’s government refused a bailout for the business of A$1.4 billion.
Healthcare stocks fell 2.6 per cent as Australian-listed shares of Fisher & Paykel Healthcare Corp (FPH) plunged 6.8 per cent and industry’s behemoth CSL (CSL) tumbled 2.9 per cent.
Meanwhile, miners remained reasonably safe as gold stocks rose 1.9 per cent on the back of a firm bullion. However, the world’s largest miner BHP dropped by 2.5 per cent after flagging lower steel output and lower capital spending this year despite a rise in third-quarter iron ore production.
However, while the Australian stock market falls across the board and the Australian share market forecast looks rather bearish, there are still some well-performing options to be kept on your radar.
Top Australian stocks to watch now: where to invest amid looming crisis
Australian gold miners have caught a sweet spot between the falling Australian dollar and soaring gold prices. The yellow metal is now trading around $1,680 per ounce, standing at above $1,700 just a few days ago. In Australian dollar terms, the commodity surged above A$2,700 for the first time ever in March. As long as prices remain around these historically high levels, gold miners are set to earn a nice premium.
Among good Australian stocks to invest in sit a few local gold mining businesses. While all companies have had some production issues, Northern Star Resources (NST) now trades up 12 per cent, and Evolution Mining (EVN) has gained 24 per cent since the start of 2020.
Newcrest Mining (NCM) stock has lost 8.6 per cent in value, which is still rather impressive if you consider that the benchmark ASX 200 is off over 20 per cent for the year
If you are looking to start trading in the Australian financial markets, your options are not limited to stocks. The country’s foreign exchange market also offers great opportunities for speculation.
With AUD considered a commodity currency, the latest swings in oil, gas and gold markets – as well as the decline in China’s growth, one of the key customers for Australian commodities – boosted the Australian dollar’s volatility significantly.
Now that many traders are trying to ride the wave of rapid rate fluctuations, some of the most-traded forex pairs currently are GBP/AUD, EUR/AUD, AUD/JPY, AUD/CAD, AUD/CHF and AUD/ZAR, with AUD/USD leading the pack.
How to invest in Australian financial markets?
As the Covid-19 pandemic continues to dominate the headlines, it may be challenging for investors to choose where to place their hard-earned cash. The economic situation changes every minute, with the country’s financial markets acting unpredictably.
Are you looking how to invest in the Australian stock market or forex without making long-term commitments and still having a chance to profit from the rising volatility? Consider trading contracts for difference, or CFDs.
A CFD is an agreement between an investor and a broker to profit from the price difference between the opening and the closing value of the trade. It gives you the opportunity to hold a long position, speculating that the price will rise, or a short position, speculating that the price will fall.
CFDs allow you to trade on margin, offering easier execution and greater liquidity. However, as CFDs are a leveraged product, gains, as well as losses, are magnified.
No matter whether you have a positive or negative view of the Australian markets, you can still try to profit from the future price fluctuations.
Trade Australian Dollar / US Dollar CFD
Learn more about CFD trading with free online courses provided by Capital.com.
