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Victoria lockdown starting to bite

05:34pm August 07 2020

Westpac senior economist Matthew Hassan discusses the latest Westpac Card Tracker. (Josh Wall)

Having timely data on what is going on the economy is always invaluable.

But that is particularly the case with a shock of the scale of COVID-19, given the material impact of lockdowns, mobility restrictions, government support measures and different spending patterns. 

And according to the latest data from our new Westpac Card Tracker Index, which is based on the millions of credit and debit card transactions processed by the bank every day, the renewed lockdowns in Melbourne are starting to bite – and not just in Victoria. 

Nationally, the Index dropped to 95.6 for the week ending August 1, the lowest weekly read since mid-June and reversing the robust recovery through May to early July when reads ultimately topped 100 (pointing to greater spending than a year earlier).  

Put another way, the latest data however suggests annual growth in spending in the week to August 1 was a material 4.4 percentage points below its pre-COVID-19 pace. 

Clearly, the slowdown can be blamed on the “second wave” in Victoria, with the state’s index dropping to just 86.7 as stage three restrictions in Melbourne took hold. Notably, the data however predates this week’s move to the tighter stage four lockdown announced on August 3. As such, a further significant weakening is highly likely near term, even despite the massive growth in online shopping we’ve seen during the pandemic. 

But it’s not just a Victoria story – other states have also seen a significant pull-back, likely reflecting both the sentiment shock from Victoria’s lockdown and a reduction in domestic tourism-related spending. NSW, which is also dealing with – albeit smaller – COVID-19 outbreaks, has slid to an index read of 96.5, while spending in states with far fewer COVID-19 cases and less restrictions is faring better, WA posting a read of 102.1.

Unsurprisingly, discretionary spending flows weakened significantly around the country, with the latest week showing an index read of 92, well below pre-COVID pace as the services sub-component slumped as more people stayed home. Essentials spending flows also eased but remain just above 100, supported by people in Victoria stocking up ahead of lockdown. 

Clearly the move to tighter stage four lockdown in Melbourne will have an impact on the national economy, Westpac this week lowering our Australia growth forecast for 2020 to minus 4.7 per cent from minus 4.2 per cent.

But given the level of uncertainty and speed of developments, having near real-time data is more important than ever. And the Westpac Card Tracker is providing a timely read on spending shifts that will be a crucial guide to the economy as we move through the COVID-19 shock. 

The information in this article is general information only, it does not constitute any recommendation or advice; it has been prepared without taking into account your personal objectives, financial situation or needs and you should consider its appropriateness with regard to these factors before acting on it. Any taxation position described is a general statement and should only be used as a guide. It does not constitute tax advice and is based on current tax laws and our interpretation. Your individual situation may differ and you should seek independent professional tax advice. You should also consider obtaining personalised advice from a professional financial adviser before making any financial decisions in relation to the matters discussed.

Matthew is a senior economist with Westpac. His specific areas of expertise are housing markets and the Australian consumer sector. Matthew’s research has been instrumental in shaping Westpac’s views on the Australian economy, including recent calls on official interest rates. His research has provided important insights into housing market developments and the behaviours of the Australian consumer. He is the author of Westpac’s monthly Red Book report, regards as essential reading on the consumer sector. Before joining the Westpac team in 2007, Matthew held senior positions with leading economic consultancies in Australia and New Zealand.

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