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Economic update – August 2017
With solid GDP growth and continued improvement in the labour market, the Australian economy appears well positioned despite wage weakness. The RBA is possibly even more bullish on employment than in previous months, noting that stronger labour market growth should see a pickup in wages over time.
Economic update – July 2017
The Australian economy appears well positioned with an improving employment situation, strong manufacturing growth, and a robust retail sector. However, the improved employment outlook contrasts with the lack of growth in wages, which remains at a record low.
Economic update – 2016/17 review
Financial markets started the financial year 2016/17 in a state of surprise coming off the Brexit result just a few days before. Markets were also looking ahead to elections in Europe, as well as the US Presidential election with the contest of Clinton vs. Trump. As things turned out, the European elections proved more benign than feared, while the US election delivered a more unexpected result.
Economic update – May 2017
The Budget’s bank levy, weaker commodity prices and signs of a slower domestic economy all contributed to the local equity market falling in May. Interestingly, the Australian dollar did not fall as much as these developments might have suggested. However, the outlook for commodity prices and both US and Australian interest rates, may indicate that a further weakness of the Australian dollar is likely in coming months. (more…)
Federal budget – May 2017
“Fairness, security and opportunity” is the Treasurer’s slogan for 2017 Federal Budget! Some have noted that this seems to be an unusual Liberal Budget in that it seeks to achieve a number of outcomes more commonly associated with Labor ideologies.
Economic update – April 2017
Equity markets continued to rally in April, though with a little less conviction than in recent months. The stronger economic growth seen in a number of countries since late last year now appears to be continuing. This, combined with elevated equity valuations and very low levels of equity volatility, suggests equity markets are vulnerable to some retracement in coming months. Bonds would be a natural beneficiary of this, especially since inflation in the United States (US) looks likely to be lower than markets had previously expected.
Economic update – March 2017
The latest data shows the Australian economy looking a bit softer, while the US economy continues to display good positive momentum. In these circumstances it is not surprising to see the Reserve Bank of Australia (RBA) leave the cash rate at 1.5% and the US Federal Reserve (the Fed) lift its cash rate to nearly 1.0%. With the Fed likely to lift the cash rate at least twice more this year we should see parity between the local and US cash rates for the first time since late 2000. That should put downward pressure on the Australian dollar/US dollar which remains stubbornly high, at around US$0.76. Despite the relative economic performance, the Australian equity market outperformed the US and global equity indices in March.
Economic update – February 2017
February saw more signs of economic conditions improving, though perhaps less in Australia than in some other countries. Although the local economy grew a respectable 1.1% in the December quarter and business conditions improved in January, nevertheless the labour force remains under-utilised and business investment spending is expected to decline further. The strength of the Australian dollar is not helping and the Reserve Bank’s expectations about the economy this year may prove too optimistic. The RBA has left the cash rate at 1.5% and financial markets expect this to remain in place until the start of a new tightening cycle in early 2018.
Economic update – January 2017
President Trump was the main subject in January’s news causing some consternation in financial markets and leading to weakness in the US dollar. That in turn helped emerging markets and gold to outperform, while Australian equities underperformed in the month.
Economic update – 2016 in review
2016 was a dramatic year for the world’s financial markets. The year started with collapsing oil prices, fears of recession and deflation, equity markets falling sharply and investors favouring bonds and “expensive defensives”. By the end of the year we had rising oil prices, renewed optimism about the United States (US) growth and inflation, cyclical equities rallying, bonds selling off and defensives falling out of favour. In between we had on again/off again OPEC deals, elections and Brexit. The solid overall returns recorded by a number of asset classes in 2016 mask considerable within-year volatility and within-market sector rotation.