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Australia has often been tagged "The Lucky Country", and whilst there may be debate in some quarters about that description, when it comes to the current COVID situation it would be hard not to agree. Former treasurer Peter Costello noted on the ABC earlier this week that Australia has always suffered from the tyranny of distance, while his predecessor Paul Keating famously described Australia at being at the "ar*e" end of the world.
Both statements are true enough, but thanks to being surrounded by a great big moat (Costello's term again), and being where we are in the world, we are now benefitting from that tyranny. Historically a combination of the moat and distance is largely responsible for what, and figuratively where, we are today. Australia was remote from the rest of the world for millions of years, resulting in the diversity of flora and fauna we're now blessed with (koalas and kangaroos) or infamous for (venomous critters). Indigenous people survived without interference from the outside world for 60,000 years until the arrival of the First Fleet, paradoxically sent here because of the very same moat, and the same tyranny of distance.
Now, far from being disadvantaged, we're the beneficiaries of both moat and distance, even as we see panic buying return as cases "spike" to double digits on multiple days in Victoria. Across the other side of the world, there are riots in the USA and elsewhere as some people refuse to wear a mask, citing it as an "infringement" of their rights. Meanwhile, they crowd onto beaches in California and Florida, and of all places, Bournemouth in the south of England (which is less of a beach than a bunch of stones on the English Channel, one of the more polluted stretches of water Hedge Clippings has ever taken a dip in).
But we digress. Yes, we're lucky, and thankful that relatively speaking we have (to date) dodged the worst that medically COVID might have done to us. In the UK they're easing restrictions in spite of 307,980 cases and 43,230 deaths; In the US they're not quite as sure (depending on their political or religious leanings) whether to mask up and isolate, demonstrate, or enjoy some cash and card-free "shopping", as they top the world with 2,504,588 cases and 126,780 deaths (and counting). Readers wanting more up to date information can find it here. Economically and socially, while many Australians are sweating on what the government is going to do post the September end of Job Keeper or Seeker, or being able to go interstate, cases and deaths are still rising globally.
As many are realising, our borders will remain closed (much like Queensland and WA) until the rest of the world is clear of COVID, or the risk can be mitigated thanks to a vaccine, unlikely to be until mid next year according to the experts. Until that time, sections of the economy will have to remain on government support or a lifeline of one sort or another. However, asking what that will look like at the end of June, halfway through phase-1 in the fast-changing world of COVID, is premature. Presumably, where support is required (travel and tourism in particular), support will be provided, even if it means running the mint's printing presses 24x7 while the government heavies the banks to maintain support at both the consumer and business level.
The past history of banks doing just that hasn't always been exemplary. However, this time around they risk their own stability if they decide to pull the rug out from beneath the customer. You can bet your last dollar that ScoMo and Josh will be reminding them that during the GFC the government handed the banks a lifeline, even though they were on the opposition benches at the time.
Closer to home, and back in the office, this week we caught up with Kristiaan Rehder of the Bennelong Kardinia Absolute Return Fund who shared his views here on the market's past few months and what may lie ahead. His fund has done well to avoid the volatility of the market, as on average has the overall managed fund sector, which to the end of May was down -6.30%, less than half the fall of -12.70% suffered by the ASX200 Total Return Index. Taking that over 12 months, all equity funds still managed a return of +1.37% against the ASX200 TR's fall of -6.70% Full details can be found here.
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