Lower oil prices are not great for Australians

Lower oil prices and government transfer payments may boost household disposable incomes in the coming months. But we think the downturn in consumer confidence and the rising number of cases of the coronavirus in Australia will mean that the extra income is saved, not spent. What’s more, the declines in the price of oil are bad news for Australia’s LNG exporters. And we suspect the bulk of the additional investment incentivised by the Government’s stimulus package will be spent on imported machinery and equipment. The upshot is that we are leaving our forecast that growth will be just 1% this year unchanged.