Share prices of the major packaging companies are rising as the country enters recession on the sharpest fall in economic growth since World War II. But, household consumption is falling fast.
Amcor's stock price rose by 2.75 per cent in morning trade today, ProPac was up by 3.2 per cent, and Orora by 1.3 per cent as analysts digested data that showed household consumption fell by 12 per cent in the Covid quarter, following a 1.1 per cent fall in the March quarter.
Many packaging companies have done well in the Covid period with demand for labels in particular surging and panic buying resulting in some goods flying off supermarket shelves.
Australia is now officially in its first recession for 29 years. GDP fell by seven per cent in the June quarter, following a 0.3 per cent fall in the March quarter, leaving the national economy is 6.3 per cent smaller than it was a year ago.
Commenting on the dire economic figures, Prime Minister Scott Morrison said it is a devastating day for Australia.
"It's a heartbreaking blow to Australians around the country,” he said.
Morrison and Treasurer Josh Frydenberg are now looking at a series of business-friendly stimulus measures that will include fast-tracking billions of dollars in tax cuts, creating new business incentives, and reforming industrial relations.
Frydenberg said Australia's strong economic position going into the crisis has given the government the "financial firepower" to respond.
The tax cuts Frydenberg refers to are due to be implemented form 2022-24, and will culminate in Stage 3, a 30 per cent tax top line for personal earnings between $45,000 and $200,000. Frydenberg said the stimuls measures will be unveiled in the October budget.
The 7 per cent fall in Australia’s GDP is lower than the 10 per cent typical of similar countries. Analysts say this is thanks to the government’s $48bn stimulus and assistance package and a booming iron ore export market.
The economic figures revealed that hours worked in the Covid quarter fell by 9.8 per cent, which was only half that forecast by the Reserve Bank. Household savings trebled as consumers reined in spending on job fears.
The advent of the recession is leading industry groups to fire up calls for major reform. The Australian Chamber of Commerce and Industry is among the groups now pushing the treasurer to pursue bold tax reforms.
“For too long tax reform has been in the too hard basket," ACCI chief executive James Pearson said. “It must be at the top of the reform agenda if we are to achieve strong, inclusive job-creating growth.”
Australian Industry Group chief executive Innes Willox said the government could not just look at Covid in isolation, saying it needed to look at why business investment has been declining for the past year. He said, “Incentives to improve business investment will need to be a central part of the fiscal response by the federal government.”