As the U.K, Europe and U.S. dare to dream about reopening and restoring their pandemic-ravaged economies, the theory that pent-up demand will drive a speedy recovery is being played out at the other end of the world.
Australia and New Zealand’s success in suppressing COVID-19 — outside isolated flare-ups — has sparked a snap back in household and business sentiment, spurring activity and hiring and laying the ground for a sustained recovery. With vaccines being rolled out across the developed world, the prospect of a return to normal is tantalizingly within reach.
Households Down Under are cashed up due to government largess and limited spending options during their respective lockdowns. That prompted Aussies and Kiwis to salt away funds, freeing up room to consume.
"Substantial fiscal boosts, combined with an internalization of spending has driven a sharp rebound in spending by households in Australia and New Zealand,” said James McIntyre of Bloomberg Economics in Sydney. "Rising asset prices are delivering a further boost. But both economies could see recoveries whither as fiscal boosts fade and borders reopen.”
Australians were quick to dump their pots and pans and let someone else handle the cooking when seated dining resumed at restaurants and cafes in their city. The numbers eating out have continued to grow, responding to steady increases in capacity as density limits are wound back.
U.K. Prime Minister Boris Johnson this week outlined a plan to ease restrictions in a series of stages over the next four months. Britain has been under lockdown since early January and Johnson’s plan doesn’t see indoor hospitality resuming until April 12.
But Bank of England policymakers are also sounding a note of caution on expectations of a coming splurge, noting the wealthiest households have built up the most cash and are least likely to spend.
Under Johnson’s plan, government guidance requesting people to work from home where possible will remain in place at least until June. The U.K. has immunized 28 out of every 100 people, compared with 20 in the U.S. and just six in Germany, according to Bloomberg’s COVID-19 Vaccine Tracker.
New Zealand, which has led the world in suppressing the virus, similarly holds poll position on returning to work, with the nation’s offices basically back to normal.
Everyone from Kiwis to Australians to Singaporeans and Canadians are taking advantage of record low interest rates to establish or expand their foothold in the property market. This is an expected and desired outcome of looser monetary policy.
Yet New Zealand also holds a warning: housing soared 19% in January from a year earlier and the central bank is already reinstating restrictions to clamp down on riskier lending to investors. To date, Australia appears content to let its slightly less ebullient market run.
Events took a further turn on Thursday when New Zealand’s government announced it would require the central bank to take account of rampant house prices when setting interest rates.
The importance of restoring normalcy was brought home starkly this week when the U.S. death toll reached half a million. President Joe Biden highlighted the context before a candle-lighting ceremony at the White House.
"That’s more Americans who’ve died in one year in this pandemic than in World War I, World War II and the Vietnam War combined,” he said on Monday.
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