Australian Market Update September 2013
Australia has a number of factors at play with the latest NAB business and consumer confidence surveys showing business conditions are still at their low over the last four years. Although spending has tapered off with income, the savings ratio has increased according the RBA Graph below:
The lowering of the Australian dollar continues to impact foreign investment and the conditions for manufacturing, resources, retail and construction still seem weak. The all ordinaries ASX 200 has risen by just over 18% over the last 12 months to the end of August 2013 so has recovered signifcantly in the last 3 years.
The housing market has had a boost with a rise in the price of houses. This has been led by lower interest rates which could continue, due to the state of the labour market and concerns for secure working conditions.
According to the Australian Bureau of Statistics property has increased in all states of Australia over the year from the June quarter 2012 to the June quarter 2013. There has been a significant turnaround from the previous 12 months of negative growth in some states.
"Annually, house prices rose in Perth (+11.0%), Darwin (+7.7%), Sydney (+6.1%), Brisbane (+3.7%), Melbourne (+3.3%), Canberra (+2.6%), Hobart (+1.2%) and Adelaide (+0.6%)"
If you take the weighted average of all of the eight capital cities the price index rose 5.1% over that time period. While the reserve bank cash rate currently holds steady at 2.5% it seems logical to see why property has become a much more popular asset class in recent times. Recent housing and construction statistics show that approval trend for private sector housing has been increasing for the last 8 months up to July 2013
In terms of employment, the figures according the ABS are also weaker showing that the number of people employed fell by over 10,000 during July 2013. It still remains at a four year high of 5.7% and with a change in Government it will difficult to know whether this trend will continue into the future.
The cost of living continues to remain as it is with annual inflation over the June quarter showing no significant changes sitting at 2.4%. This seems in line with the RBA?s targeted range of 2% to 3%. The RBA?s reality check on the state of affairs provided a rate cut of 25 basis points back in August to 2.5% thanks to decision of the RBA Governor Glenn Stevens.
With Australia?s currency exchange rate still quite high (given the historical data) the governments easing monetary policy should still provide the trade based sectors some buoyancy and position the economy for greater long term growth.
Another point to raise is that Ben Bernanke of the Federal Reserve in the US announced that he is looking to taper their monetary policy later in the year which could have a global impact on markets and will depend on their next quarter of activity.
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The information contained in this Market Update is current as at 21 September 2013 and has been prepared for Invest Choice Pty Ltd trading as My Money Calculator. This market update has been prepared without taking into consideration your objectives, financial situation or needs. Because of this you should, before acting on any advice or acquiring a financial product, consider whether it is appropriate to your objectives, financial situation and needs. Past performance is no indication of future performance.