April, 2009: households across Australia start receiving $950 cheques in the mail in line with the Rudd government's efforts to stimulate the economy in the wake of the Global Financial Crisis. In all 8.7 million individuals receive cheques, totalling around $8 billion dollars. From the 1st of April 2009 to the 1st of June of the same year, the All Ordinaries index jumps from just over 3500 to 4000, a rise of nearly 15%. April, 2020: In line with the Morrison Government's relaxation of the superannuation rules, as many 800,000 Australians each withdraw up to $10,000 from their super accounts, totalling almost $8 billion. May, 2020: 6 million Australians receive their first payment as per the Government's Jobkeeper stimulus measure. The first Jobkeeper payment is backdated to the 31st of March, thus each individual initially receives a payment of over $3000, at a total cost of $18 billion. Around $26 billion dollars will arrive in bank accounts of millions Australians over the next few weeks, either as a result of early withdrawn super or as part of the initial Jobkeeper payment. Even when you factor for inflation, this is around 2.5 times the size of the 2009 Rudd stimulus payments. We know what happened to Australian stocks after the $950 cheques started reaching Australian mailboxes back in 2009. Surely it would be reasonable to assume that with a significantly larger pool of money set to arrive in bank accounts across Australia in the space of just a few weeks, this is likely to have a comparable positive impact on the local stockmarket? I find it puzzling that no one seems to be paying attention to this.
March to June bounce may well be a coincidence Patrick because both Wall St and the ASX had bottomed early March 2009 and there was nowhere to go except "Up" after both markets bottomed. One could be right for wrong reasons too.
Not sure the Rudd payments were in any way connected to a 15% rise in the stock market in 2009 - they were unrelated. The Rudd payments arguably had no impact on the stock market which was playing follow the leader with the global equity markets. So the logic doesn’t follow that the stock market will rise as cheques land. The money is not being invested - it is replacing lost income - as one article says it’s compensation not stimulus - I don’t see it as a stock market influence I’m afraid.
Regarding the early withdrawal of funds from superannuation - is it known if the funds affected have begun liquidating assets including equities or are they obliged to wait until that April 20th date to begin selling? Thanks.
I agree with you Marcus. A look at the DJIA for 2009 indicates it bottomed in the week ending March 6 2009. It then began rising steadily. The All Ordinaries reached its bottom one week later and then followed the DJIA by also steadily rising. Had the rise, as Patrick suggests, been linked to the stimulus payments people received in 2009 then one wouldn't expect the two markets to be in synch since no payments were received by people in the USA. Other larger macro forces at work I think.
Patrick, withdrawing $10,000 from super is selling stocks, not buying. And do you really think unemployed people getting $750 a week government handout are buying stocks??
I don’t know your firm but must say your comments today are good commonsense observations and unbiased.i will subscribe to your podcasts. thanks, bryan
I'm not sure Patrick is suggesting they would be buying stocks with the handout, I think he's talking about the effect the extra spending will have on the economy and business bottom lines in general. I stand to be corrected though, and I agree with Marcus, I don't think they are related.
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Why doesn't the growing liquidity crisis and the end of the Fed Put as a result worry you?