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Economics | August 10, 2020

Easing East Coast petrol prices Aussies use stimulus payments to pay bills & save Weekly Petrol Prices; COVID-19 Household survey; China inflation Fuel prices: According to the Australian Institute of Petroleum, the average unleaded Terminal Gate Price

(TGP) or wholesale price stands at 101.8 cents a litre today, down by 0.3 cents over the week. The terminal gate diesel price stands at 104.9 cents a litre, down by 0.8 cents over the week.

East Coast petrol prices: Over the past three weeks average daily unleaded retail petrol prices have fallen by up to 22 cents a litre in Sydney and Melbourne to $1.14 and $1.21 a litre, respectively, as the discounting cycle continues. Pump prices in Brisbane are also falling, down 13 cents a litre to $1.30 a litre on average with prices expected to fall further due to the commencement of the discounting cycle.

COVID-19: Survey of households: According to data released today from the Australian Bureau of Statistics (ABS), “One in three Australians (32 per cent) received a Commonwealth stimulus payment in May. People were most likely to use the May stimulus payments to add to savings (29 per cent), pay bills (28 per cent), and purchase food and non-alcoholic drinks (12 per cent).”

Chinese inflation: Chinese consumer prices rose by 2.7 per cent over the year to July (survey: +2.6 per cent) following a 2.5 per cent annual gain in June. Producer prices fell by 2.4 per cent in July from a year ago (survey: -2.5 per cent), after a 3 per cent annual decline in June.

Movements in the petrol price can affect consumer spending, and in turn, prospects for retailers. The Chinese data is important for exporters, especially rural producers, consumer goods, mining and energy companies.

What does it all mean? Good news for motorists in Australia’s biggest cities. Unleaded petrol prices are easing on the East Coast,

according to fuel app MotorMouth. Sydney and Melbourne drivers are enjoying lower unleaded petrol prices - averaging between $1.14 and $1.21 a litre today - down by up to 22 cents a litre from recent peaks on July 21.

In Sydney, motorists should shop around for the best deals with unleaded pump prices still above $1.20 a litre in parts of the Inner West, North Shore, Northern Beaches and Eastern Suburbs. Prices are below $1.10 a litre in the South-West and Southern Suburbs. But motorists should fill up this week with the current discounting cycle due to end next week.

August 10, 2020 2

Economic Insights. Easing East Coast petrol prices

Despite the virus lockdown and fewer cars on the road, average Melbourne unleaded bowser prices are hovering around $1.21 a litre today. But prices are below $1.13 a litre in Footscray and Yarraville. And with pump prices elevated at $1.30 a litre in Tullamarine, Keilor Park, Collingwood, Fitzroy and Altona, drivers should top up their tanks this week with pump prices expected to be lower next week.

Brisbane’s unleaded petrol prices are averaging $1.30 a litre today, down by 27 cents a litre from the most recent peak of the retail price cycle on August 3. Petrol prices are continuing to ease from the most expensive phase of the cycle, so motorists should top up rather than fill up this week. And in Adelaide, drivers should fill up with prices increasing from tomorrow after bottoming at around $1.06 a litre today.

What are Aussies doing with their COVID-19 government stimulus payments? According to an ABS survey released today, around one-third (32 per cent) of those surveyed received a payment in May. And 42 per cent of those recipients paid off their bills, while 40 per cent saved their coin and stocked up on essentials, including food and non-alcoholic beverages (31 per cent).

And where did most recipients of government stimulus payments reside? In May, almost half of Tassie adults (46.6 per cent) received a payment, compared to 31.8 per cent of adults nationally. Recipients were second highest in South Australia (38.7 per cent), followed by Queensland (36.7 per cent), NSW (31.8 per cent), Victoria (27.5 per cent), Western Australia (26.3 per cent) and Northern Territory/ACT (21.6 per cent). Of course, the number of Victorian recipients will likely increase in later surveys due to the renewed lockdown in Melbourne.

What do the reports and figures show? Petrol prices

According to the Australian Institute of Petroleum, the average unleaded Terminal Gate Price (TGP) stands at 101.8 cents a litre today, down by 0.3 cents over the week. The terminal gate diesel price stands at 104.9 cents a litre, down by 0.8 cents over the week.

MotorMouth records the following average retail prices for unleaded fuel in capital cities today: Sydney 114.5c; Melbourne 121.3c; Brisbane 130.2c; Adelaide 106.3c; Perth 111.2c; Canberra 122.6c; Darwin 118.8c; Hobart 124.1c.

Last week the key Singapore gasoline price lifted by US$3.40 a barrel or 7.6 per cent to a 7-week high of US$47.90 a barrel. In Australian dollar terms, the Singapore gasoline price rose by $4.77 or 7.7 per cent to 4-week highs of $66.46 a barrel or 41.80 cents a litre.

Household Impacts of COVID-19 Survey, May

According to the ABS, “[Survey] Information was collected between 10 May and 23 May 2020 from approximately 2,600 people via telephone interview.”

Key findings:

According to the ABS, “As of May, one in three Australians (32 per cent) had received a personal stimulus payment from the Australian Government.

Almost half of Tasmanian adults (47 per cent) had received a stimulus payment from the Government by May, compared to 32 per cent of adults nationally.

Women were more likely to have received a stimulus payment than men (36 per cent compared to 27 per cent).

One in four employed people (27 per cent) who received a stimulus payment put it towards their mortgage or rent, compared to 8 per cent of those not working or not in the labour force in May.

Two in five people without private health insurance (40 per cent) received a stimulus payment, compared to only one in four (24 per cent) people who had both hospital and extras cover.

Australians with a qualification were less likely to have received a stimulus payment (27 per cent) than those without (41 per cent).”

August 10, 2020 3

Economic Insights. Easing East Coast petrol prices

Chinese inflation - July

Chinese consumer prices rose by 2.7 per cent in the year to July (survey: 2.6 per cent) after lifting by 2.5 per cent in the year to June.

Food prices rose by 13.2 per cent in July from a year ago, primarily due to a lift in pork prices (up 85.7 per cent).

Consumer prices rose 4.3 per cent in July compared with a year ago.

But non-food prices and prices for services were both flat in July when compared with a year ago.

Core consumer prices – which excludes the volatile food and energy components – rose 0.5 per cent in July from a year ago, down from a 0.9 per cent annual growth rate in June.

China’s producer price index posted a 2.4 per cent decline on the year to July (survey: -2.5 per cent) after a 3 per cent drop in June when compared with a year ago. Factory prices have declined for six straight months.

What is the importance of the economic data? Weekly petrol prices data are compiled by ORIMA Research on behalf of the Australian Institute of Petroleum

(AIP). National average retail prices are calculated as the weighted average of each State/Territory metropolitan and non-metropolitan retail petrol prices, with the weights based on the number of registered petrol vehicles in each of these regions. AIP data for retail petrol prices is based on available market data supplied by MotorMouth.

China’s National Bureau of Statistics releases its monthly economic statistics around mid-month. Quarterly GDP data is released around the 19th of January, April, July and October. China’s Customs Office releases trade data, and the People’s Bank of China releases financial statistics, around the 10th of each month. China is Australia’s largest trading partner and changes in the Chinese economy have major implications for the Aussie economy.

The Australian Bureau of Statistics (ABS) is providing updates on the coronavirus impacts on job situation, health services, health precautions, social distancing, household stressors, support network, lifestyle changes.

What are the implications for investors? Brent and US Nymex crude oil prices are lifting today in Asian trading, building on gains of around 2.5 per cent

last week. And last week the key Singapore gasoline price lifted by US$3.40 a barrel or 7.6 per cent to a 7-week high of US$47.90 a barrel. So Aussie motorists should enjoy lower pump prices for now with imported gasoline prices climbing.

So why are crude oil prices lifting? Chief Executive Officer of State oil producer Saudi Aramco, Amin Nasser, yesterday said that crude consumption in Asia is almost back to pre-virus levels with the demand recovery continuing. Crude prices have also been lifting after OPEC producer, Iraq, said that it will cut its oil output by a further 400,000 barrels a day in August and September. And US energy companies cut the number of oil and natural gas rigs this week to a record low for a 14th successive week. US oil rigs fell by four to 176, their lowest since July 2005, according to data from energy services firm Baker Hughes. This week the US Energy Information Administration (EIA), International Energy Agency (IEA) and OPEC all release their monthly market reports.

Chinese inflation continues to diverge with consumer prices accelerating and factory price deflation easing in July. Food prices quickened due to transportation and supply disruptions caused by widespread flooding in central and southern China in July. But weak domestic demand caused by the virus lockdown earlier this year continues to weigh on business prices. That said, factory deflation is easing with rising commodity and industrial product prices lifting. The ongoing recovery in Chinese economic activity – which is expected to be reinforced when improving July monthly activity data is issued on Friday – could eventually result in a pick up in corporate profitability and business investment spending into year end. Good news for Aussie miners!

Government stimulus payments are boosting household incomes and purchasing power during the pandemic. While financially stressed households are paying their bills and purchasing essentials - such as food and beverages - employed recipients used the money to pay down their mortgages (27 per cent) in May. And saving is popular in the crisis with 29 per cent opting to put their money in the bank. Key business and consumer confidence surveys are issued in the coming days with Melbourne’s second virus lockdown unnerving consumers and business owners.

Ryan Felsman, Senior Economist, CommSec Twitter: @CommSec