Will fossil fuels be used as a ‘quick-fix’ to revive the economy?
The week that was: Will fossil fuels be used as a ‘quick-fix’ to revive the economy?
Early last week the PM announced Australia should be back in business by July after comprehensive health protocols were released by the national cabinet. Discussions of a trans-Tasman travel corridor were also raised; a potential blueprint for restarting travel worldwide.
Later in the week, the PM unveiled a three-stage plan to easing restrictions. State and territory leaders will announce when and how the plan will be rolled out in each jurisdiction throughout this week.
Off-the-back of the RBA’s monthly board meeting last Tuesday it was announced rates were kept on hold at 0.25%, while spending had hit its low point in the fortnight up to 1 May based on ANZ and CBA card transaction data.¹ As restrictions loosen in some states, slight spending increases are anticipated that will see more cash circulate in the economy.
To get an idea of the scale of devastation wrought by the pandemic, in the past six weeks almost one million people have lost their jobs and another five million received the JobKeeper wage subsidy. More than one million had accessed their superannuation under COVID-19 early release, and 384,000 businesses accessed seven billion dollars in emergency cash payments that were announced in the second $66 billion assistance package.* These alarming figures point to the urgency of the national cabinet and need for Australia to get ‘back to work’.
Good news on the horizon?
In positive news, Reserve Bank governor Philip Lowe hinted at a potentially stronger economic recovery than first thought.
"A stronger economic recovery is possible if there is further substantial progress in containing the coronavirus in the near term and there is a faster return to normal economic activity," Lowe said.²
On the other hand Lowe explains: “if the lifting of restrictions is delayed or the restrictions need to be reimposed or household and business confidence remains low, the outcomes would be even more challenging than those in the baseline scenario.”²
In a bid to avoid a wider calamity, it’s clear that the economy will have to pick up speed soon. However, at the same time, we must be careful not to unnecessarily increase health risks.
The ethical dilemmas in COVID-19 ‘quick-fixes’
Federal Resources Minister Keith Pitt last week put pressure on banks that have abandoned coal vowing that mining and energy projects will be the key to power Australia’s coronavirus recovery.³
Does this dash hopes for a green focused recovery?
According to the Australian Conservation Foundation (ACF), rather than reverting to Australia’s inherent reliance on the industries driving climate change, this crisis offers an opportunity to boost markets and jobs in clean industries.
In response to Resources Minister Keith Pitt’s comments, ACF CEO Kelly O’Shanassy said:
“Mining thermal coal in the Galilee Basin or building new coal-fired power plants is the opposite of bouncing forward out of this crisis. It would bounce us right back into the midst of our climate change problems.
“Clean industries are where we will find abundant jobs and economic wealth. […] We have a chance to boost markets and jobs in clean industries.”⁴
As mentioned previously, we are seeing a ‘new normal of sustainability.’ Sustainable funds are weathering the volatility and outperforming their mainstream counterparts.
Furthering O’Shanassy’s argument, last week saw:
• Westpac announce it would stop financing thermal coal projects by 2030.
• The Australian Industry Group, which represents more than 60,000 businesses, call for the climate crisis and COVID-19 economic recovery to be tackled together.
• The Investor Agenda Group mention that plans exacerbating climate change would expose investors and national economies to escalating financial, health and social risks in coming years.⁴
David Brennan, Director - Distribution
*Figures based on findings in the below two articles: The ABC, Almost one million Australians lose jobs due to coronavirus, published on 5 May, accessible at: https://www.abc.net.au/news/2020-05-05/almost-one-million-australians-lose-jobs-due-to-coronavirus/12215494, accessed on 11 May. The AFR, Early super withdrawals approach $10b, published on 7 May, accessible at: https://www.afr.com/politics/super-pulled-from-150-people-s-funds-in-early-access-fraud-20200507-p54qpo, accessed on 11 May.
¹The Australian Financial Review, Card Data shows Spending Has Hit Rock Bottom, published 5 May 2020, accessed at: https://www.afr.com/policy/economy/card-data-shows-spending-has-hit-bottom-20200505-p54pu0, Accessed on: 7 May 2020.
²The Australian Financial Review, Stronger economic recovery on the cards: RBA, published 5 May 2020, accessed at: https://www.afr.com/policy/economy/stronger-economic-recovery-on-the-cards-rba-20200505-p54q3k, accessed on: 7 May 2020.
³The Australian Financial Review, Coal can power the restart, not divestment: Pitt, published 6 May 2020, accessed at: https://www.afr.com/companies/mining/coal-can-power-the-restart-not-divestment-pitt-20200505-p54psp, Accessed on: 6 May 2020.
⁴The Australian Conservation Foundation, Memo to Minister Pitt: runaway climate change is a disaster for jobs, published 6 May 2020, accessed at: https://www.acf.org.au/memo_to_minister_pitt_runaway_climate_change_is_a_disaster_for_jobs, accessed on 7 May 2020.
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