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With Autumn underway, the changing season is a reminder to take stock and prepare for what’s ahead as the financial year heads towards its final quarter and the May Federal Budget.

The gloomy prospects for economic growth, both in Australia and overseas, are occupying the minds of investors, businesses and political leaders.

The Reserve Bank of Australia believes global growth will remain subdued for the next two years and that Australia‘s economy will slow this year because of rising interest rates, the higher cost of living and declining real wealth. The RBA forecasts the unemployment rate, currently at a low 3.5%, to rise by mid year and inflation, which was 7.8% over 2022, to drop by around 2-3% over coming years thanks to an easing in global prices that will eventually flow through to Australian prices. Oil prices fell almost 3% in February reversing the increase of the previous month.

There have been some economic bright spots recently such as the rebound in retail trade in January of 1.9% after a 4% plummet in sales figures in December. And, Australia‘s current account surplus increased $13.3 billion to $14.1 billion in the December quarter 2022 supported by sustained high commodity prices including $400 billion worth of mining commodity exports during 2022.

That positive news was enough to lift the Australian dollar slightly to just over US67c, halting a slow decline during February.

Australian shares were down by almost 3% during February, while US stocks were down by just over 2% for the month and more than 7% for the past year.

With Autumn underway, the changing season is a reminder to take stock and prepare for what’s ahead as the financial year heads towards its final quarter and the May Federal Budget.

The gloomy prospects for economic growth, both in Australia and overseas, are occupying the minds of investors, businesses and political leaders.

The Reserve Bank of Australia believes global growth will remain subdued for the next two years and that Australia‘s economy will slow this year because of rising interest rates, the higher cost of living and declining real wealth. The RBA forecasts the unemployment rate, currently at a low 3.5%, to rise by mid year and inflation, which was 7.8% over 2022, to drop to by around 2-3% over coming years thanks to an easing in global prices that will eventually flow through to Australian prices. Oil prices fell almost 3% in February reversing the increase of the previous month.

There have been some economic bright spots recently such as the rebound in retail trade in January of 1.9% after a 4% plummet in sales figures in December. And, Australia‘s current account surplus increased $13.3 billion to $14.1 billion in the December quarter 2022 supported by sustained high commodity prices including $400 billion worth of mining commodity exports during 2022.

That positive news was enough to lift the Australian dollar slightly to just over US67c, halting a slow decline during February.

Australian shares were down by almost 3% during February, while US stocks were down by just over 2% for the month and more than 7% for the past year.

February marks the end of summer holidays for many of us and getting down to business for 2023. It can be a good time to reflect on plans and goals for the months ahead.

China’s plans to kickstart its economy after the pandemic shutdown have been dominating the news this month and will have worldwide implications, not the least for Australia. As our largest trading partner, an increase in demand is likely to bring improvements in our commodity prices, exports and share prices (particularly of companies exposed to China).

Australian shares were up nearly 8% in January while US stocks climbed by about 5% but the markets are nervously waiting for expected increases in interest rates by major central banks this month to help curb inflation.

Australia’s inflation rate jumped by 1.9% in the December quarter to 7.8% for the year. It was the biggest increase since 1990 and more than twice the rate of wage growth, despite the Reserve Bank’s moves to increase the cash rate during 2022.

The ANZ-Roy Morgan consumer confidence index increased slightly in January to finish at 86.8 points but it’s still 15 points behind the same time last year. The NAB business conditions survey recorded a third successive fall in December although business confidence improved slightly and remains well above average.

The Aussie dollar fell slightly from near eight-month highs, easing towards US70c ahead of the expected rate rises by major central banks overseas.

As a new year begins, we wish everyone a happy, healthy and prosperous 2023. Many families will be glad to put 2022 behind them and although challenges remain, we look forward to better times ahead.

As 2022 drew to a close, investors remained focused on inflation, interest rates and recession worries. Inflation is running at around 7% to 11% in most advanced economies, including Australia (7.3%). The Reserve Bank of Australia (RBA) lifted its target cash rate by another 25 basis points to 3.1% in December, the eighth monthly rise in a row, up from 0.1% in May. The RBA noted that “inflation is expected to take several years to return to target range (2-3%)”, and most economists expect at least one more rate increase.

High inflation and borrowing costs continued to weigh on consumers in December. The ANZ-Roy Morgan consumer price index was steady at 82.5 points in the run-up to Christmas, 26 points below the same period the year before. Slowing consumer demand and rising costs also dragged the NAB business confidence index into negative territory for the first time in 2022, down to -4.4 points in November.

But it’s not all bad news. Australian company profits rose 18.6% in the year to September, the fastest pace in five years. Unemployment remains low, despite edging up to 3.45% in November and annual wages growth was 3.1% in the September quarter, the fastest pace in a decade. The Aussie dollar lifted slightly to US68.13c in December, down 6% for the year. Iron ore prices lifted 8% over the month but were down 1% for the year, while oil prices (Brent Crude) eased slightly but were up 11.4% in 2022 as war in Ukraine disrupted supply.

It’s December, summer is here and holidays are just around the corner. We take this opportunity to wish you and your family a happy festive season!

The big story on the global economic front continues to be inflation, and how high interest rates will go to tame it. November began with the US Federal Reserve hiking its federal funds target range by another 75 basis points to 3.75-4.00%. There are signs the tough approach is working, with the annual rate of inflation falling from 9.1% in June to 7.7% in October.

In Australia, the Reserve Bank lifted the cash rate another 25 basis points to a decade high of 2.85%. Inflation fell to 6.9% in the year to October, down from 7.3% in September, but remains high and economic signals are mixed. Reserve Bank governor Philip Lowe is keeping a close eye on consumer spending, where higher interest rates are having an impact. Retail trade fell 0.1% in October for the first time this year. And while the ANZ-Roy Morgan consumer sentiment index was up 5.6% to 83.1 points in the last three weeks of November, it remains 22.9 points below the same week last year. But rate hikes are not yet affecting the labour market, with unemployment falling to a 48-year low of 3.4% in October, while annual wages growth rose 1% to 3.13% in the September quarter, the fastest growth in a decade.

The Aussie dollar lifted 3c to around US67c over the month, crude oil prices fell 10% while iron ore lifted 0.5%. Shares remain skittish but positive overall. The ASX200 index rose more than 5% in November while the US S&P500 index was up more than 2%.

Welcome to our newsletter. While the race that stops a nation is always a highlight of early November, on the economic front the Labor government’s first Budget, handed down in late October, has been a talking point.

Treasurer Jim Chalmers’ first Budget was delivered against a backdrop of continuing turmoil on the global economic front. The UK reversed its promised tax cuts that spelled the end of Liz Truss’ brief tenure as Prime Minister. She was replaced by the more economically credible Rishi Sunak. In the US, media reports suggested the US Federal Reserve will scale back its aggressive interest rate hikes in December. Both events were welcomed by financial markets, but the same challenges remain. Escalating war in Ukraine, energy supply shortages, rising inflation and interest rate hikes to fight it, still point to a likely recession in the US and elsewhere. Oil prices continue to rise as OPEC restricts supply, with Brent Crude up about 13% this month, but recession fears are moderating the price pressures.

In Australia, economic signals are mixed. Reserve Bank assistant governor, Luci Ellis said in a speech that Australia’s ‘’neutral” cash rate should be at least 2.5%. The rate is already at 2.6% after a 25-basis point rise this month, but further increases are expected. Unemployment rose slightly to 3.5% in September, perhaps indicating labour shortages are easing. The ANZ-Roy Morgan consumer confidence index slipped below its 2022 average of 90.3 on recession fears and the falling Aussie dollar. The dollar fell another 2c to around US63.2c in October. Businesses are more optimistic, with the NAB business conditions index up 3 points to a 15-month high of 25 points in September.

It’s October and the footy finals are almost over, depending on which code you follow. In Canberra though, Treasurer Jim Chalmers is warming up for his first Budget on October 25 against a background of mounting economic pressures.

In September, persistently high inflation and aggressive rate hikes by the world’s central banks put global share and bond markets under pressure. The US Federal Reserve has lifted rates seven times this year, but US inflation remains at 8.3%. There is now growing fear that central banks may push the world into recession. In a surprise twist, the Bank of England (which has also lifted rates seven times this year) was forced to switch back to Quantitative Easing, buying government bonds to support the British pound which crashed to a record low in response to a stimulatory mini-Budget released by the new Conservative Party leadership. This led to a late relief rally on global sharemarkets and a fall in the US dollar and global bond yields. Even so, major global sharemarkets finished the month down 6% or more.

In Australia, the picture is a little brighter. Economic growth was up 3.6% in the year to June. Company profits are also strong, up 28.5% in the year to June, and unemployment remains low, at 3.5% in August. While inflation eased from 7% in July to 6.8% in August, due to falling petrol prices, it is still well above the Reserve Bank’s 2-3% target. Aussie consumers continue to spend at record levels, pushing up retail spending by 19.2% in the year to August, and petrol prices are set to increase by at least 22c a litre after the reinstatement of the fuel excise. Both will put upward pressure on inflation and interest rates.

The Aussie dollar fell more than 3c against the surging US dollar in September, to US65c.