Economic and market news
In Australia, it is being suggested that the tipping point in consumer spending has been reached. Economists are predicting that consumption activity, which has remained resilient in the face of soaring cost of living soaring and associated year of interest rate rises, is about to turn down.
This week, the Reserve Bank of Australia’s Deputy Governor talked about the trade-offs being faced in setting monetary policy. In particular, she highlighted the difficulty of reducing price pressures before inflation expectations adjust higher (with damaging long term economic consequences), while seeking to limit the short term damage to the labour market. She was widely reported as saying that unemployment will need to rise in order to bring inflation back to the 2-3 per cent target.
In overseas news, the Bank of England upped the ante in its campaign to reduce inflation, raising its policy rate by 0.5 percentage points, to 5 per cent. This was after a series of 0.25 point increases. It was said that this move was in response to headline inflation that is ‘stuck’ at 8.7 per cent, and core inflation that is still accelerating.
The BoE was said to have flagged that more policy tightening might be needed, given faster than expected wages growth, relatively buoyant consumer spending, and sticky inflation in the services sector.
In China, there is more evidence of a slowdown in the economic recovery. It was reported that consumer spending is slowing across a broad range of categories. Domestic travel spending during the recent holiday for the dragon-boat festival was lower than pre-pandemic levels, according to official data released this weekend. Home sales figures are below the level in previous years, while estimates for June car sales showed a drop from a year ago.
Australian indices
ASX 200: Fell over the week, 3.26 per cent, to close at 7118.2 points on Tuesday.
All Ordinaries: Also fell, 3.29 per cent, in the week, closing at 7300.0 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
|
98.52 |
4.09% |
-1 |
+51 |
+130 |
|
GTAUD5Y:GOV Australia Bond 5 Year Yield |
2.25 |
92.95 |
3.84% |
-2 |
+38 |
+36 |
|
GTAUD10Y:GOV Australia Bond 10 Year Yield |
4.50 |
104.60 |
3.93% |
-2 |
+20 |
+16 |
|
GTAUD15Y:GOV Australia Bond 15 Year Yield |
3.25 |
89.57 |
4.14% |
-2 |
+11 |
+24 |
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) |
|
4.10 |
+0.25 (6 June 2023) |
+0.25 (6 June 2023) |
0.85 |
Currencies (source:RBA)
As at the close on 27 June, the AUD/USD had fallen 1.34 per cent in the week, to 0.6712. The AUD/RMB had fallen 0.84 per cent in the period, to 4.8406.
Venture Capital
ENA Respiratory
Stoic investee ENA Respiratory announced that it has moved forward on its fourth patent application in the United States. It has been allowed to apply for patents covering the use of INNA compounds, including INNA-051. This is part of a key patent family for the company.
Forcite
Stoic investee Forcite was this week featured in TechCrunch. The CEO and co-founder Alfred Boyadgis and CTO Tom Larcher talked about the future of motorcycle technology and the contribution of the MK1S smart helmet to a safer riding future.
Property
National auction clearance rates held above 70 per cent for the eight week. Up to 73.8 per cent from 72.5 per cent the previous week. It was reported that some of the strength is related to demand from first-buyers in NSW getting into the market ahead of tax changes in the new financial year.
In the commercial property sector, there are concerns about a looming funding crunch. This is off the back of ongoing construction delays, and a series of corporate failures, which is creating investor nervousness. The increased return on other, relatively less risky, investments in the higher interest rate environment is also reducing investor appetite in the sector.
