Economic and market news
The new Australian Federal Government issued its first full budget last week. It contained $15 billion of welfare increases and cost of living relief, as well as a broad range of spending on clean energy transition, defence, and infrastructure.
It also included predictions of a budget surplus for the financial year 2022/23, the first in 16 years. This estimated $4.2 billion was said to be the result of higher commodity prices, and low unemployment resulting in more tax revenue and lower welfare payments. However, it was clear that the surplus is likely to be followed by successive budget deficits as the economy slows and iron ore prices fall.
Ahead of the budget speech, there was considerable focus on whether the package of measures would be inflationary. While the Treasurer suggested that his net $21 billion injection into the economy would not fuel prices rises, commentators and economists were generally unconvinced that would be the case. As such, there was discussion that the budget would lead to inflation, and therefore official interest rates, being higher for longer.
In China, economic data are said to be showing signs that the post-COVID recovery may not be as strong as hoped. China’s consumer spending and industrial activity grew at a slower pace than expected in April, adding to signs the recovery in the world’s second-largest economy is losing momentum. April also saw record youth unemployment rates.
In the United States, annual inflation reportedly cooled for the 10th straight month, to 4.9 per cent. However, the monthly rate rose from 0.1 per cent to 0.4 per cent amid continued strength in the cost of services and energy. This has led economists to forecast further rate rises by the Federal Reserve at its next meeting in June.
Likewise, in the United Kingdom, the Bank of England raised its policy rate to 4.5 per cent, the 12th increase in a row, and the highest level since 2008. Quarterly forecasts accompanying the decision were said to show the UK economy is likely to avoid falling into a recession this year, partly as a result of the recent fall in energy costs, a pick-up in economic activity in China following the ending of its zero-COVID policy, and a more benign environment in Europe than anticipated.
Australian indices
ASX 200: Fell slightly again over the week, 0.4 per cent, to close at 7234.7 points on Tuesday.
All Ordinaries: Also fell, 0.43 per cent, in the week, closing at 7424.1 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 |
3.25
|
99.97 |
3.25% |
+0 |
+29 |
+70 |
|
GTAUD5Y:GOV Australia Bond 5 Year Yield |
2.25 |
95.88 |
3.14% |
-1 |
+10 |
+9 |
|
GTAUD10Y:GOV Australia Bond 10 Year Yield |
4.50 |
109.13 |
3.41% |
-2 |
+9 |
+2 |
|
GTAUD15Y:GOV Australia Bond 15 Year Yield |
3.25 |
93.62 |
3.76% |
-1 |
+10 |
+19 |
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) |
|
3.85 |
+0.25 (2 May 2023) |
+0.25 (2 May 2023) |
0.35 |
Currencies (source:RBA)
As at the close on 16 May, the AUD/USD had fallen 1.53 per cent in the week, to 0.6778. The AUD/RMB also fell, 0.96 per cent, in the period, to 4.6474.
Commodities
Lithium prices were said to be recovering as demand outstrips weaker-than-expected supply growth, amid the concerted global energy transition.
Venture Capital
Ferronova
Stoic investee Ferronova attended the SAGES 2023 conference and presented on the techniques being used in ongoing clinical trials, and the potential impacts of the research on the field of colorectal cancer treatment.
Forcite
Co-founder of Stoic investee Forcite, Alfred Boyadgis, spoke to the VICE Media Asia series 'Art of Ambition,' about his journey building the company, including the challenges he has faced as an entrepreneur.
Morse Micro
CEO of Stoic investee Morse Micro, Michael De Nil, talked to Security Today about the new era of WiFi connectivity for consumers and service providers thanks Wi-Fi HaLow. He also unpacked the three trends you can expect to see soon!
Property
A return to rising house prices, and surging rents, is said to be of concern to the Reserve Bank of Australia in assessing the path needed to constrain inflation.
Meanwhile, rental vacancies were reportedly higher in April for the third consecutive month, and the rate of growth in rents slower. This was said to be as a consequence of first home buyers entering the market (and exiting the rental market) as nationa house prices start to turn up again.
