global economy Archives

Quarterly Economic Update: July-September 2024

10 October, 202410 October, 2024 Economy, Finance, Investing

The Australian economy is still growing, but things are moving slower than usual, and the Reserve Bank of Australia (RBA) is being cautious with any changes to interest rates. They’re waiting for inflation to settle before taking further action. GDP Growth: Slowly But Surely While the economy is growing, it’s not as fast as we might like. Over the June quarter, the economy expanded by just 0.2%, with a 1.5% growth over the financial year. While these numbers sound positive, when you factor in Australia’s growing population, the story changes. For the sixth quarter in a row, GDP per capita (which looks at economic growth per person) has actually fallen. This shows that while Australia as a whole is growing, individuals may not feel that impact, especially with rising costs of living. Interest Rates: Holding Steady In September, the RBA decided to keep interest rates on hold at 4.35%, with the next decision due in November. While the US recently cut rates, Australia hasn’t followed suit, and it’s unlikely we’ll see any rate cuts before Christmas. The RBA is holding off to ensure inflation is well under control, despite it being much lower than the peak in 2022. Inflation: Better But Still Stubborn Annual inflation hit 3.8% in the June quarter, slightly up from March. However, there’s good news: underlying inflation (which strips out the more volatile price changes) has been falling for six straight quarters, down from its peak of 6.8% in late 2022. That said, prices for everyday goods remain high, and the overall cost of living is still squeezing households. Households Are Tightening Their Belts With cost-of-living pressures building, many Australians are cutting back on things like travel and entertainment. Even grocery spending is down, with households trimming their food budgets by 1%. However, spending on household goods, like furniture and appliances, increased by 4%, which propped up discretionary spending overall. Housing Market: Prices Still Going Up The property market remains strong, with housing values continuing to rise across Australia, although at a slower pace than before. CoreLogic reports that the national Home Value Index rose by 0.5% in August and a further 0.4% in September. Despite the cost of living, demand for property remains high, which is keeping prices elevated. Jobs Market: Still Tight, But Productivity Is Falling Australia’s unemployment rate remains low, sitting at 4.1% as of June, which is historically strong. However, total hours worked rose only slightly, and productivity—measured by GDP per hour worked—fell by 0.8%. While jobs remain secure for many Australians, people are working more for less output, and this could become a concern for long-term economic stability. Global Outlook: Uncertainty Ahead Globally, central banks are starting to look at easing monetary policies, but it’s still unclear how much they’ll ease up. Ongoing conflicts in the Middle East, Ukraine, and northern Africa are causing further instability. Meanwhile, Asia’s economy, a key trading partner for Australia, is expected to slow in 2024, which could have a knock-on effect on our own economic growth. What It All Means for You For everyday Australians, the combination of high interest rates, sticky inflation, and rising living costs means it’s more important than ever to manage your finances carefully. Mortgage holders won’t see relief from rate cuts soon, and households should continue to be mindful of their budgets, especially with the cost of essentials like groceries and petrol still fluctuating. If you’re feeling the pinch, now is a good time to seek professional advice and ensure you have a financial plan in place that helps you navigate these uncertain times. The information provided in this article is general in nature only and does not constitute personal financial advice. 

Quarterly Economic Update: April – June 2024

1 July, 202427 June, 2024 Updated on27 June, 2024 Economy, Finance, Investing

The economy continues to slow, with inflation remaining sticky, the new federal budget making waves, and global events that may have a significant impact. Uncertainty at home and abroad The current outlook indicates uncertainty both domestically and internationally, making it unlikely that inflation will reach the target range of 2-3 per cent in the near future. May forecasts suggested that inflation would return to the target range by the second half of 2025 and reach the midpoint by 2026. However, recent indicators point to weak economic activity, such as slow GDP growth, an increase in the unemployment rate, sluggish wage growth, and uncertain consumption growth. Advanced economies are experiencing a slowdown in growth, although there are signs of improvement in the Chinese and US economies, along with increased commodity prices. Nevertheless, geopolitical uncertainties remain high, which could potentially disrupt supply chains. The Federal Budget focuses on social matters Treasurer Jim Chalmers presented the 2024-2025 Federal Budget on May 14, 2024. The government aimed to alleviate the cost of living without worsening inflation. Key announcements included: Interest rates remain steady, but the pain may not be over The Reserve Bank of Australia (RBA) kept interest rates on hold and the cash rate steady at 4.35 per cent throughout the quarter. At the June RBA board meeting, Governor Michele Bullock stated that the board has not dismissed the possibility of further rate hikes. Interest rates will stay at this level until the RBA’s next board meeting in early August. Inflation persists, despite slowing Inflation remains persistent, with the RBA predicting that it will take some time to consistently stay within the target range of 2-3 per cent. Although inflation has decreased significantly since its peak in 2022, the rate of decline has slowed. At the same time, economic growth has been limited as households cut back on non-essential spending due to income constraints. What are we spending on? Households are continuing to limit their spending on non-essential items. Spending on discretionary goods has shown a slow increase, rising by only 0.6 per cent over the year. On the other hand, spending on non-discretionary goods and services has risen by 5.8 per cent, mainly due to higher fuel and food costs. Household spending on health has significantly increased, showing a 15.7 per cent rise compared to this time last year. Health spending made the largest contribution to the overall 3.4 per cent rise in household spending in April. China lifts Aussie beef bans China has lifted bans on most beef and other exporters. The bans began in 2020 when China suspended beef exports from eight processors and imposed official and unofficial trade barriers on barley, coal, lobster, wood, and wine, costing exporters $20 billion Australian dollars ($13 billion) a year. These measures were viewed as politically motivated actions to penalise Australia, although China claimed they were related to trade issues. With the lifting of these bans, less than $1 billion worth of Australian exports are still being impeded. This marks a significant reduction from the previous $13 billion impact on Australian exporters. Trump down but not out Donald Trump’s conviction on 34 felony counts of falsifying business records has not stopped his campaign for President. As the November election looms closer, economists have expressed concerns about Trump’s campaign promise to impose a 10 per cent tariff on all US imports. If implemented, this and other trade policies could trigger another round of trade wars, disrupt international trade, and impact global growth. The information provided in this article is general in nature only and does not constitute personal financial advice.

The Wealth of Gold: Investing in a timeless asset

26 April, 202323 April, 2023 Updated on23 April, 2023 Economy, Investing

As investors navigate through unpredictable and volatile economic times, it is essential to consider asset classes that can provide a level of stability and protection against market fluctuations. One such asset that has stood the test of time is gold. For centuries, gold has been a symbol of wealth and has played an essential role in the global economy. Why Investors Turn to Gold During Volatile Times Gold has long been considered a safe haven asset, as it has maintained its value throughout history. When the stock market experiences downturns or geopolitical tensions escalate, investors often flock to gold as a way to protect their portfolios against market fluctuations. The price of gold typically moves in the opposite direction of the stock market, making it a valuable hedge against economic uncertainty. Moreover, gold is not subject to the same risks as other investments such as bonds or stocks, making it a reliable store of value. Benefits and Consequences of Investing in Gold The primary benefit of investing in gold is its ability to provide a level of diversification to an investment portfolio. By including gold in a portfolio, investors can reduce their exposure to other assets, thus lowering overall risk. Additionally, gold is a tangible asset that investors can physically hold, making it an appealing option for those who prefer assets they can see and touch. However, investing in gold also comes with some drawbacks. The most significant risk associated with investing in gold is its volatility. While gold has maintained its value over time, its price can still fluctuate significantly over shorter periods. Furthermore, investing in gold does not provide a source of income, as it does not pay dividends or interest. Investors looking for regular income streams should consider other investments, such as bonds or stocks that offer dividend payouts. Interesting Facts About Gold Gold has been used as a form of currency for thousands of years. In ancient times, individuals and countries stockpiled gold as a way to preserve their wealth. For instance, during the California Gold Rush in the mid-1800s, the US government established the first national gold reserve to help stabilize the economy. Similarly, during World War II, countries like the US and the UK stockpiled gold to finance their war efforts. Getting Exposure to Gold Investors have several options to get exposure to gold. The most common way is to invest in physical gold, such as gold coins or bars. However, buying physical gold can be expensive, and investors also need to pay for storage and insurance costs. An alternative option is to invest in gold exchange-traded funds (ETFs), which track the price of gold and offer investors an easy way to invest in gold without the hassle of buying physical gold. Finally, investors can also invest in gold mining stocks, which provide exposure to the gold industry and can potentially offer higher returns than investing in physical gold or gold ETFs. While investing in gold can offer protection against market fluctuations and diversify an investment portfolio, it is crucial for investors to carefully consider the risks and benefits associated with this asset class. By weighing the pros and cons and assessing how gold aligns with their investment objectives, investors can make informed decisions about whether to include this timeless asset in their investment strategy. The information provided in this article is general in nature only and does not constitute personal financial advice.

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