Unemployment rises, Australia’s cybersecurity comes under threat and … Afterpay continues its run

What a week for Australia.

On Wednesday, the latest unemployment data was released, revealing the official unemployment rate now sits at 7.1% and on Friday, it was revealed Australia's cybersecurity was at risk.

85,700 people lost their positions in May this year, with the Australian Bureau of Statistics announcing 227,700 Australians lost their jobs between mid-April and mid-May.

This equates to 927,600 Australians losing their jobs during the COVID-19 pandemic and the second largest monthly loss of jobs on record, behind April figures that showed 594,300 Australians had their employment terminated.

To put this in perspective, 65,400 lost their job in October 1982 – the third biggest loss of jobs in Australian history.

There are many who believe these figures are underestimating the impact.

Wealth Within founder Dale Gillham says, “I don’t believe this figure tells the real story. That’s because there are a number of factors at play that have not been included in the recent figures. This includes people who have been looking for a job, but given up in this current environment together with the thousands of individuals on the JobKeeper program whose businesses are only just surviving, as restrictions are lifted, because of the stimulus package provided by the government.

“While the government is happy to keep paying the JobKeeper payments until September, I believe we will see a significant spike in unemployment when they stop, given that we cannot keep increasing our debt to stimulate the economy. But what is even more concerning is that the average household has very little savings and, as such, there is very little wiggle room if the government does stop paying the JobKeeper payments. When this occurs, we will not only see a spike in unemployment but also a spike in mortgage defaults.

“As a country, if we cannot get back to where we were pre-COVID-19 quickly, then there will be a significant strain on an already overloaded welfare system, as businesses close and unemployment increases.”

The other major event was the revelation that Australia is under cyberattack by a "a sophisticated state-based cyber actor".

On Friday, Prime Minister Scott Morrison revealed all levels of Australian government, critical infrastructure and the private sector are being targeted.

"This activity is targeting Australian organisations across a range of sectors, including all levels of government, industry, political organisations, education, health, essential service providers, and operators of other critical infrastructure," Mr Morrison said.

"What I simply can confirm is there are not a large number of state-based actors that can engage in this type of activity, and it is clear based on the advice that we have received that this has been done by a state-based actor.”

"With very, very significant capabilities."

In response to the Prime Minister’s announcement, Macquarie Government Managing Director Aidan Tudehope said with regard to the State-based actor actively targeting critical Australian sectors and infrastructure, “The Prime Minister’s warning paints a vivid picture of the constant and evolving threats to Australia’s cyber security from malicious state-based actor groups.

“Our economy has never been more dependent on cloud services and virtual communication and collaboration to live and to work, with many people working from home and accessing business systems remotely. At the same time, the economy has perhaps never been more vulnerable. With such economic uncertainty at the moment, businesses need to be acutely aware of the very real and increasing economic, reputational and relationship damage a cyber breach causes.

“It is more important than ever that Australian organisations are taking the timely guidance provided by the Australian Cyber Security Centre (ACSC) to protect themselves and the economy. All organisations across industries and at all levels of government should, as an absolute minimum, be adopting the ACSC’s Essential Eight strategies to mitigate cybersecurity risks.

“In the long term, we need to invest in people, sovereign cyber skills and training, partnership between industry and government, and secure infrastructure to ensure we are well placed to control the continuing risks of malicious cyber activity.”

The best and worst performing sectors this week

As Australia considers its cybersecurity, it's interesting to note that the Information Technology is (at the time of writing) the best performing sector – up nearly 6%. Energy and Real Estate was up nearly 3%.

Materials had a bad week along with Consumer Discretionary up just under 1% and Utilities is up just over 1%.

As for stocks, Gillham says, “Looking at the ASX top 100 stocks, Afterpay has continued its spectacular rise, as it is up over 11% given that speculators continue to push it higher attempting to cash in on the run. However, I suspect they may now be too late, as the run will most likely end soon. A2 milk is another stock that speculators like to jump into and it is up over 9% this week followed by TPG and Amcor, both up over 7%.

“The worst performers include Flight Centre, down over 7%, followed by Star Entertainment Group and Fortesque Metals, both down over 5% so far for the week.”

So what's next for the Australian share market?

The All Ordinaries Index traded lower this week, but it is currently trading up over 1% on where it closed last week.

That said Gillham believes “the rise is far from impressive because as I previously mentioned, over four of the last seven trading days, the All Ordinaries Index has closed lower indicating that the market is moving forward with caution. If the market does close near where it began for the week, then we could see further downside.

“We are now in the period for a short term high to occur, therefore, volatility will increase over the next few weeks and any recent gains could be ending. Last week I mentioned that the market could continue to fall, and while it did fall lower this week, I mentioned that if the down move only lasts for a few weeks and is under 10%, then the market would rise into the second half of this year. Right now, it is too early to tell if the down move is over, as it could last for a few more weeks. For now, you should exercise caution when buying and if the market does fall away, be prepared to exit.”