Economic and market news
Ahead of this week’s annual meetings of the members of the International Monetary Fund (IMF), the organisation predicted that countries accounting for as much as a third of the global economy would experience recession this year or next. This was said to be increasing the chance that the global economy will experience a trough, and that would mean the loss up to US$4 trillion of output by the end of 2026. The IMF has urged policymakers to ‘stay the course’ in bringing down inflation. Meanwhile, Australia’s Federal Treasurer was reported as saying that recession in some of the world’s major economies is now a ‘probability’ rather than as ‘possibility’.
In Australian economic news, new data show that consumer sentiment has fallen to near historic lows amid the inflation and energy crisis. However, the Reserve Bank’s smaller-than-expected rate increase in October apparently supported confidence. Despite the ‘gloom’ of consumers, business was said to have ‘roared’ in September and taken conditions to their second highest recording (only behind the post-COVID lockdown surge 2021). These data were supported by new figures from the Australian Bureau of Statistics which show household spending in August lifted for the 18th consecutive month to be 20 per cent higher than a year earlier, and 15 per cent above pre-pandemic levels.
In the week, the Reserve Bank published its bi-annual assessment of financial stability. It was reported that while the slowdown in the economy is not considered a significant direct risk to financial stability, first home buyers and low-income households are the most ‘vulnerable’ borrowers and will likely experience a ‘cash squeeze’, depleting accumulated cash reserves. This was followed up with comments from the financial regulator that there will be a ‘repayments shock’ when borrowers who had fixed their mortgage rates in the pandemic revert to variable rates, that are now significantly higher.
There was considerable coverage this week on the economic and infrastructure issues related to the clean energy transition, led by The Australian Financial Review’s Energy & Climate Summit. As part of this, it was suggested by power company leaders that retail electricity prices could soar by at least 35 per cent in 2023, due to the unprecedented cost of wholesale energy, and as the system grapples with the transition to clean energy amid a global supply crisis.
Australian indices
ASX 200: Fell 0.81 per cent over the week, to 6645.0 points at the close on Tuesday.
All Ordinaries: Fell 0.88 per cent in the past week, closing at 6844.3 points on Tuesday.
Government Bonds
Government Bond Yields (Source: Bloomberg)
|
NAME |
COUPON |
PRICE |
YIELD |
1 DAY |
1 MONTH |
1 YEAR |
|
GTAUD2Y:GOV Australia Bond 2 Year Yield |
0.25
|
93.69 |
3.37% |
+11 |
+44 |
+328 |
|
GTAUD5Y:GOV Australia Bond 5 Year Yield |
2.75 |
95.56 |
3.70% |
+13 |
+46 |
+272 |
|
GTAUD10Y:GOV Australia Bond 10 Year Yield |
1.75 |
81.17 |
4.03% |
+17 |
+47 |
+231 |
|
GTAUD15Y:GOV Australia Bond 15 Year Yield |
3.25 |
87.53 |
4.28% |
+18 |
+53 |
+219 |
Reserve Bank of Australia (Source:RBA)
|
RBA CASH RATE TARGET (RBATCTR:IND) CURRENT (per cent) |
MOST RECENT DECISION (percentage points) |
MOST RECENT CHANGE (percentage points) |
1 YEAR PRIOR (per cent) |
|
2.60 |
+0.25 (4 October 2022) |
+0.25 (4 October 2022) |
0.10 |
Currencies (source:RBA)
As at the close on 11 October, the overall strength of the USD had pushed the AUD/USD rate down again, 3.46 per cent, on last week, to 0.6250. The AUD/RMB was down a further 2.41 per cent, in the week to 4.4961.
On Monday the Australian dollar fell to fresh lows against the US dollar, amid rising geopolitical tensions and ever increasing concerns of global recession. Alongside this, Asian central banks were said to be supporting their currencies (as the US dollar strengthens and local companies hoard reserves) in an effort to prevent their economic recoveries being stifled by imported inflation.
Commodities
The Australian Financial Review highlighted the view that markets see Australia as a form of safe haven in the current turmoil, because its economy is tied to outputs that are global essentials such as wheat, iron ore, metals, and coal.
Venture Capital
Ferronova
Stoic investee Ferronova published an important study on the role of sentinel lymph node mapping in colon cancer, including in relation to: detection of micro‑metastasis, the effect on survival, and as a driver of a paradigm shift in the extent of colon resection.
Property
In the commercial property market there has been further activity in the regional shopping mall sector, with good yields expected. There has reportedly been over $1.4 billion in non-metro sub-regional sales nationally in FY22, more than double the previous financial year’s outturn of $675 million.
Elsewhere, it wassuggested that yields onoffice, retail and industrial property investments are inching up for the first time in more than a decade, as the local real estate market absorbs the impact of global volatility and rising interest rates.
In the residential property market it wasreported that rental growth has decelerated slightly, despite record low availability.
