Moneytech COVID-19 Market Update

As the COVID-19 pandemic spreads across the globe, many governments have sought to contain the infection growth by imposing strict measures upon their populations, including social distancing guidelines and more severe economic shutdowns. This has understandably created a significant negative shock for local economies, prompting policy responses from governments and central banks to alleviate the upcoming economic damage.

Economic Impact


The mounting government-implemented shutdowns around the world in response to COVID-19 paints a gloomy picture for global growth, with ratings agency Moody’s projecting it to fall 2% in 2020. Australia’s economic growth could suffer a near double-digit hit in the June quarter despite fiscal stimulus, with JP Morgan revising their previous June quarter GDP growth from a contraction of -3.2% to -9.7%[i]. They also expect US GDP growth to shrink at an annualized rate of 14%[ii] in the April-June period this year while Bank of America and Oxford Economics see a 12%[iii] drop in the country’s 2nd quarter GDP growth. In addition, KPMG UK’s chief economist expects the UK to face a contraction of 2.6%[iv] in GDP growth this year.


The unemployment data for Australia is forecasted to rise, with more than 814,000 Australians potentially out of work in the June quarter.  Westpac have forecasted the unemployment rate to reach 11% by June with job losses to reach 40% in the arts and recreation services and 29% in the hospitality industry[v]. In the US, the St. Louis Federal Reserve President James Bullard forecasted the US unemployment rate could rise to 30% from the current 3.5% in Q2 due to shutdowns to contain the spread of coronavirus[vi].

Policy Response

Monetary Policy

Central banks around the world including Australia, the UK, New Zealand and the US have lowered their policy rates over the past month to support cheaper lending and interest burdens in their domestic economies. Notably, the Australian cash rate dropped twice by 0.25 percentage points to the current 0.25% cash rate, whilst the US Federal Reserve cut their policy rate band twice from 1.50-1.75% to 0-0.25%. New Zealand’s interest rates dropped to 0.25% in one meeting from the previous 1% rate, and the Bank of England cut their official rate from 0.75% to 0.1%[vii].

Given how many central banks have reached the effective lower bound of their policy rate, many are engaging in quantitative easing programs to artificially lower market yields. The US Federal Reserve and RBA have announced that they will be implementing quantitative easing measures aimed to inject liquidity into struggling domestic markets. The US Federal Reserve’s quantitative easing program will remain open ended and will supply market liquidity through buying treasury bonds and mortgage-based securities, with no strict budget in place[viii]. The RBA has also started a milder QE program where they are purchasing 3-year Australian Government Bonds to try enforce a market yield of 0.25% (currently around 0.30%)[ix].

Fiscal Stimulus

The Australian parliament passed through more than AU$80b in stimulus on Monday which will include cash payments up to $100,000 to small businesses, loan guarantees, support for apprentices and the doubling of unemployment benefits[x]. Fiscal stimulus packages have continued internationally with the US in the final negotiation stages of a stimulus package worth around US$2tn[xi]. The UK also announced a £350b stimulus package[xii] and the NZ government a NZ$12.1 billion package[xiii]. Governments have advised that further fiscal stimulus packages may be released as the economy continues to be impacted by the coronavirus pandemic.

[i] U.S. 2020. JP Morgan Economist Says U.S. GDP Could Drop 14% In Second-Quarter. [online] Available at: <> [Accessed 24 March 2020].

[ii] Australian Financial Review. 2020. Double Digit Hit To June Quarter: JP Morgan. [online] Available at: <> [Accessed 24 March 2020].

[iii] 2020. Bank of America predicts 12% drop in 2nd quarter; Bloomberg [online] <> [Accessed 24 March 2020].

[iv] News, S., 2020. KPMG: GDP To Drop By 2.6% In 2020. [online] Scottish Financial News. Available at: <> [Accessed 24 March 2020].

[v] 2020. Australia unemployment to soar to 11.1% by June; Bloomberg [online] Available at: <> [Accessed 24 March 2020].

[vi] 2020. Fed Unleashes Unprecedented Measures to Shore Up Reeling Economy

 Bloomberg. [online] Available at: <> [Accessed 24 March 2020].

[vii] Media, T., 2020. Central Banks, Summary Of Current Interest Rates. [online] Available at: <> [Accessed 24 March 2020].

[viii] 2020. Fed Unleashes Unprecedented Measures to Shore Up Reeling Economy Bloomberg. [online] Available at: <> [Accessed 24 March 2020].

[ix] 2020. Australia at the Brink of QE Has Markets Primed for These Moves Bloomberg. [online] Available at: <> [Accessed 24 March 2020].

[x] 2020. Australia to unleash a 66 billion second stimulus package Bloomberg.


Available at: <> [Accessed 24 March 2020].

[xi] 2020. Negotiations Falter Over $2Tn US Stimulus Deal. [online] Available at: <> [Accessed 24 March 2020].

[xii] 2020. UK government to help pay workers wages during pandemic Bloomberg. [online] Available at: <> [Accessed 24 March 2020].

[xiii] SmartCompany. 2020. New Zealand Outstrips Australia, UK And US With $12 Billion Coronavirus Package For Business And People In Isolation – Smartcompany. [online] Available at: <> [Accessed 24 March 2020].