Economic and market news
In Australian news this week, the Reserve Bank of Australia decided to raise its monetary policy rate for the 10th consecutive meeting. The increase of 0.25 percentage points took the official rate to 3.60 per cent, the highest level since May 2012. The cumulative total monetary policy tightening since May 2022 is now 3.5 percentage points. In his statement, the Governor continued to emphasise the need to keep inflation expectations anchored at the target, or else the economic and social harm from inflation would be greater. He also stressed the risks posed to the outlook by the slowdown in the world economy, and the unpredictable reaction of consumers as the impact of interest rate rises starts to bite household disposable incomes. Commentators noted that the statement indicated more rate increases are likely to be needed to quell inflationary pressures.
In related news, data released this week show that the economic growth rate for the final quarter of 2022 is estimated to be 0.5 per cent, bringing the annual rate to 2.7 per cent. This was said have been below the market expectations of 0.7 per cent for the quarter. Within the headline figure, consumer spending was still strong, with it being noted that this has pushed the household savings rate down to 4.5 per cent, below the pre-COVID levels, and the long term average.
The January CPI figures showed a slowing of inflation in the month, down 1 percentage point from December to 7.4 per cent, raising hopes that price pressures in the Australian economy are now past their peak.
However, retail sales figures for January were said to have rebounded (up 1.9 per cent) after a relatively weak December outturn (November being strong, thanks to Black Friday and other sales events). Commentators suggested this ‘cements in’ the case for more rises in the official interest rate.
Australian indices
ASX 200: Rose 1.46 per cent this week, to 7364.7 at the close on Tuesday.
All Ordinaries: Rose 1.40 per cent, closing at 7562.6 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
|
99.74 |
3.37% |
-13 |
+15 |
+226 |
|
GTAUD5Y:GOV Australia Bond 5 Year Yield |
2.25 |
94.33 |
3.45% |
-12 |
+10 |
+160 |
|
GTAUD10Y:GOV Australia Bond 10 Year Yield |
4.50 |
106.84 |
3.68% |
-8 |
+9 |
+155 |
|
GTAUD15Y:GOV Australia Bond 15 Year Yield |
3.25 |
91.51 |
4.12% |
-7 |
+6 |
+157 |
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) |
|
3.60 |
+0.25 (7 March 2023) |
+0.25 (7 March 2023) |
0.10 |
Currencies (source:RBA)
As at the close on 7 March, the AUD/USD had risen 0.60 per cent in the week to 0.6713. The AUD/RMB had fallen slightly further, 0.28 per cent, in the same period, to 4.6561.
Commodities
As Australia’s major iron ore producers announce significant profits, The Australian Financial Review discussed the technical challenges facing the industry as the world pushes for ‘green steel’. The focus in the piece is on the emissions created during the process of making the steel, and related to the impurities present in much of the country’s iron ore. This is separate from the more normally discussed issue of producing steel using lower or non-carbon-emitting power sources.
In light of the Chinese Government’s announcement of an unexpectedly low growth target, at 5 per cent, there was also discussion about the possibility that this would mean Australian exports, particularly iron ore, will be weaker than forecast.
Venture Capital
Wildlife Drones
Stoic investee Wildlife Drones has announced a new partnership with Advanced Telemetry Systems, Inc. By combining their expertise, they aim to provide biologists and environmentalists with the most advanced tracking technology, including with the ability to aerially track up to 40 unique tag frequencies at the same time, wherever and whenever needed.
Property
It was suggested that hotel property deals will again exceed $2 billion this year, thanks to a rebound in the tourism sector post-pandemic. Last year’s $2.14 billion (turnover of hotels over $10 million) was the second highest transaction volume on record. It was also noted that investors see hotels as a good inflation hedge, as the room rates can be updated daily.
New data show a deceleration in the price falls in Australian property, and some of that is seen to be as a consequence of a reduction in the number of properties on the market. Figures for February show that, although there was a rebound in the number of properties from the usual seasonal low in January, stock levels are still substantially lower compared with a year ago.
