Is Australia a lead indicator for a global recovery?

Tim Carleton

Auscap Asset Management

Australia has had remarkable success in controlling the impact of COVID-19. New cases peaked in August 2020, leading to most major lockdown restrictions being lifted by the end of 2020. Australia’s economic recovery has since been robust and appears to be gaining traction, supported by extraordinary levels of fiscal and monetary stimulus. 

So what lessons can we apply to offshore markets? While few major economies have controlled the virus as well as Australia, there have been clear behavioural trends observable across geographies, such as panic buying, increased spending on the home, and a pick-up in household savings ratios. This newsletter outlines some Australian data as a guide for what we might expect internationally should global COVID cases be brought under control.

Source: Auscap.

New COVID-19 cases in Australia peaked in August and appeared to be well under control by late September. Unsurprisingly, consumer confidence and retail sales growth softened during the two COVID case peaks. Since October, retail trends have experienced sustained strength.

The improvement in consumption was broad-based, including big ticket items, such as cars.


Source: Federal Chamber of Automotive Industries/Auscap. 

Foot traffic in major indoor shopping centres was heavily impacted by the spikes in COVID-19 cases, driven by a combination of government restrictions and some consumer unease. However, Australian foot traffic has since been recovering to near pre-pandemic levels, with the notable exception of CBD locations. Multiple major landlords and retailers have noted that the conversion of foot traffic into sales has increased post the COVID peaks.


Source: Company disclosures/Auscap.

Australian job advertisements now exceed pre-COVID levels. Unsurprisingly, the biggest month on month increases in job advertisements followed Australia’s recovery from each major wave.


Source: Bloomberg/Auscap.

High household savings rates, significant Government stimulus, changes to working arrangements and lower interest rates have fuelled renewed demand for residential property, with house price gains seen across the country in recent months.


Source: CoreLogic/Auscap.

This demand has extended to new housing, with housing building approvals at record highs.


Source: ABS/Auscap.

This data is interesting in the context of the global health recovery from COVID-19. The United States saw cases peak quite recently. However, the combination of lockdown measures and the rollout of approved vaccines has seen the number of new cases plummet.



Similarly in the United Kingdom, new cases peaked in early January. Since then, more than 15 million Britons have received the vaccine. This, combined with current lockdown measures, has seen new cases falling rapidly.


In fact, this trend can be seen across the globe.



There are a number of ASX-listed companies with meaningful exposure to the macroeconomic trends listed above in offshore markets, which currently trade at a discount to comparable domestic businesses. If the impact of COVID-19 has peaked, Australia may provide an interesting lead example of the ability of economies to bounce back from the pandemic. Should this be the case, there might be reason for optimism in international markets where economic data points have lagged behind Australia.

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Tim Carleton is a Principal and Portfolio Manager at Auscap Asset Management (Auscap), a boutique equities long/short investment manager. This article contains information that is general in nature and does not constitute investment or any other form of advice. This article does not take into account the objectives, financial situation or needs of any particular person nor does it constitute a recommendation to be relied upon when making an investment or any other decision. You need to consider your financial needs before making any decision based on the information in this article and a person should obtain and consider the relevant disclosure document before deciding whether to invest in an Auscap fund. No part of this article is to be reproduced or disclosed without the prior written consent of Auscap. In relation to any MSCI data in this article, the MSCI data is comprised of a custom index calculated by MSCI for, and as requested by, Auscap. The MSCI information may only be used for your internal use, may not be reproduced or redisseminated in any form and may not be used as a basis for or component of any financial instruments or products or indices. None of the MSCI information is intended to constitute investment advice or a recommendation to make (or refrain from making) any kind of investment decision and may not be relied on as such. Historical data and analysis should not be taken as an indication or guarantee of any future performance analysis, forecast or prediction. The MSCI information is provided on an “as is” basis and the user of this information assumes the entire risk of any use made of this information. MSCI, each of its affiliates and each other person involved in or related to compiling, computing or creating any MSCI information (collectively, the “MSCI Parties”) expressly disclaims all warranties (including, without limitation, any warranties of originality, accuracy, completeness, timeliness, non-infringement, merchantability and fitness for a particular purpose) with respect to this information. Without limiting any of the foregoing, in no event shall any MSCI Party have any liability for any direct, indirect, special, incidental, punitive, consequential (including, without limitation, lost profits) or any other damages. (

Tim Carleton
Chief Investment Officer
Auscap Asset Management

Tim manages the Auscap Long Short Australian Equities Fund which targets solid absolute risk-adjusted returns, looking to invest in companies that generate strong cash flows and are trading at attractive prices.

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