Australian Economic Outlook for 2013 – The year to date

Australian Economic Outlook for 2013 – the year to date

As we are a quarter into the year, it is always good to review how our views and expectation have held up, during the first 90 days of the year. If you missed our outrageous predictions for 2013,
you can download your copy here

So to recap on our predictions from December:

Australian Economic Outlook 2013Economically, if we look at some of the benchmarks:

We would expect to see lower interest rates – to help keep the wheels turning in the economy. In reality, the RBA’s decision to cut rates (and they are likely to) will at least provide some impetus and no doubt support for the real estate market. In addition, lower interest rates may discourage the higher levels of savings we are seeing. Getting people out there and spending, being a key priority. With the above scenario, lower rates, and perhaps a stabilised property sector, the banks may be able to breathe a sigh of relief, given their exposure to the property markets. That said, lower occupancy rates in many commercial and retail properties may well be a precursor to further write downs in valuations.

Please bare in mind, life hasn’t been bad for the banks – record profits, and amongst the most profitable in the world – not bad for a country with such a small population – and this is a critical component to our equity market forecast. With the prospect of dividends continuing at current levels, and perhaps the absence of growth in the resources sector, banks may continue their robust performance, particularly with the volume of superannuation money invested. One risk to this is of course the property market and any revaluation – so very much keep on this on your radar if you are a bank stock holder.

Our Australian Economic Outlook for 2013 outrageous predications include:

Lower interest rates – as the RBA continues to provide stimulus to the economy, with the possibility of rates to be cut by as much as a further 75bps over the next 12 months. WE HAVE HAD ONE CUT, TO DATE.

Australian dollar –a range of 0.96 to 1.01 vs the US – a big range and in spite of our view of falling rates may seem a little out of step. We continue to expect cost pressures to remain a problem here, in spite of the low “headline” inflation level. DESPITE THE INTEREST RATE CUT, WE HAVE SEEN THE AUSSIE DOLLAR REMAIN STUBBORNLY HIGH – CURRENTLY AT 1.0476.

INTERESTINGLY WE HAVE NOW SEEN THE TUNE OF THE GOVERNMENT CHANGE FROM THE STRONG AUSSIE DOLLAR BEING A REFLECTION OF THE STRONG AUSTRALIAN ECONOMY, TO IT NOW BEING A PROBLEM. SEE FOR YOURSELF BELOW:

9/10/2010

The strong performance of the Australian dollar reflects the underlying strength of the country’s economy, federal Treasurer Wayne Swan says.

“I think the value of the currency tends to reflect the underlying strength of the Australian economy and the view that international investors have of the Australian economy despite all of the international uncertainty that we experienced.”

17/2/2013

Wayne Swan dismissed talk of a ‘currency war’ but admitted that a strong Australian dollar is a concern for an economy that is heavily reliant on mining exports.

“It is a substantial headwind for the Australian economy, some of our industrial sectors in particular, our exporters, our tourism sector and even our miners,” Swan said on the sidelines of the Group of 20 Nations (G-20) meeting of financial ministers and central bankers in Moscow.

12/3/2013

Treasurer Wayne Swan, while expressing the virtues of last week’s solid national accounts data in parliament, conceded some business sectors and families are doing it tough because of a declining terms of trade and a Australian dollar that is staying stubbornly high.

“It is putting a squeeze on profits and incomes right across our economy,” Mr Swan told parliament on the first day of a sitting fortnight on Tuesday.

On the subject of ”Government”, in December, we wrote:

We expect to see further political instability, as the current Government’s tenuous grip on parliament is further tested. With an array of scandals throughout this parliament, and the fragile coalition under strain, there could be a blow up here, which is of course an enormous variable for markets. That said, we would be of the view that any such event would most likely be a major positive for both the economy and more specifically, the market.

NO QUESTION THE PAST COUPLE OF WEEKS HAVE BEEN A CHALLENGE TO THE LATEST VERSION OF THE RESHUFFLED GILLARD GOVERNMENT – AT LEAST WE ARE A FEW WEEKS CLOSER TO THE ELECTION AND AN END TO THE CURRENT MADNESS OF WHAT COULD EASILY BE ARGUED AS A POLICY OF SELF PRESERVATION, AT ALL COSTS.

Originally from the UK, Andrew has been a market professional for almost 19 years, trading a wide range of global markets and instruments. As a highly regarded industry speaker, he has spoken alongside Sir Richard Branson, Robert Kiyosaki, Anthony Robbins and Tony Blair, empowering many thousands of people, from all over the world, with the skills, techniques and ...
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