This is an edited version of a live discussion with Damien Klassen, Head of Investments at Walk The World Funds and Nucleus Wealth. Markets have taken a new turn over the past month, and expectations of rate cuts are rising, but how robust is this move, and how should portfolios react?
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I caught up with Robbie Barwick from the Australian Citizens Party to review the recent hearings into Regional Bank Branch closures, and more broadly about the progress made this year.
We look at the underlying issues which have been brought to the surface through the inquiry, and consider what happens next.
And here is the link to the paper which was discussed in the hearings: https://citizensparty.org.au/sites/default/files/2022-06/aust-hamiltonian-credit.pdf
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Another dose of truth from our property insider, Edwin Almedia. In today’s show we look at the November property price moves, the falling listings, and the claims agents are making for more pay. We also warn about the risks in high-rise apartments, and how to select an agent.
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More evidence from the Senate last week, concerning the impact of bank branch closures. The Small Business Ombudsman calls out what is wrong with the current system, and why small business is being degraded. He makes a strong case for significant change!
This is the fourth segment following the recent hearings in Canberra in the Senate Rural and Regional Affairs and Transport References Committee, on Friday 1st December 2023 and relating to bank branch closures.
This is our weekly market update. As always we start in the US, cover oil and gold, as well as treasuries, and then move through Europe and Asia before we cover Australian developments and crypto. A succinct summary of the weeks events.
A searing late-year rally has brought the S&P 500 to a fresh 2023 closing high, as investors bet the Federal Reserve is done raising interest rates and the U.S. economy will remain resilient in the face of tighter monetary policy.
Fed Chair Jerome Powell said the risks of hiking interest rates too much and slowing the economy more than necessary have become “more balanced” with the risks of not hiking enough to control inflation. He vowed to move “carefully” on interest rates.
Earlier this week Investor optimism about rate cuts surged after Fed Governor Christopher Waller – widely seen as a hawkish policymaker – flagged the possibility of lower interest rates in coming months if inflation continued to ease.
So, is the Fed is at risk of committing a major policy error if it begins to loosen monetary conditions too soon, which could see inflationary pressures begin to pick up again? If anything, the Fed has more room to raise interest rates than to cut them, presuming it follows the numbers. Indeed, U.S. government data released Thursday showed that the U.S. economy grew at a faster-than-expected 5.2% annual rate in the third quarter amid surprisingly robust consumer spending.
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On Friday 1st December 2023 the Senate took evidence in Canberra relating to bank branch closures. This a series of posts which presents some of the important evidence, as the Senate Rural and Regional Affairs and Transport References Committee heard from the Licenced Post Office Group (LPO).
This is the second in a series of posts following the recent hearings in Canberra as the Senate Rural and Regional Affairs and Transport References Committee heard from Robbie Barwick and co who presented the case for a public bank.
This is the third in a series of posts following the recent hearings in Canberra as the Senate Rural and Regional Affairs and Transport References Committee heard from Dale Webster, from The Regional. She and I wrote to the Committee to get this inquiry up and running.
The Centrals Bankers’ love in in Hong Kong this week was full of contradictions. Indeed, yesterday I featured the RBA’s new Governors comments, centered around her view households were largely coping ok with the 4.25% hike in rates. My reaction was how out of touch with real households she sounded.
The International Monetary Fund this month said the Australian economy was running above capacity, with low unemployment, “sticky” inflation and rising house prices and so forecast a delay in local inflation returning to the 2 per cent to 3 per cent target range until early 2026, slower than most other advanced countries. They also warned federal government that the nation’s infrastructure spending boom has helped push the economy beyond full capacity, requiring the Reserve Bank to increase interest rates further to tame inflation.
But also attending the conference, and a speaker later in the Day was Ex Governor Philip Lowe. He is worried central banks may not have increased interest rates high enough to control inflation and that cost of living help from governments adds to inflation.
The ABS, said: “The 4.9 per cent increase in CPI is down from 5.6 per cent in September and below the peak of 8.4 per cent in December 2022.” But as we will see, the number was lower, thanks partly to Government intervention, which of course means higher spending.
So perhaps the truth is, while inflation was down a little, it may be Central Banks still have more to do, so the game of political chicken on the inflation front is actually far from over. We will see.
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HI, a quick update to our followers. If you are subscribed to our blog, until about 10 days ago you would receive an email alert each time we posted here.
Unfortunately, WordPress, which is the platform the DFA Blog lives on, broke this functionality and as a result the alerts service has been suspended.
I am working to fix this, but it might need a coding update, so may take some time. In the interim, we still post on Twitter (@DFA_Analyst) and LinkedIn (https://www.linkedin.com/in/martin-north-6a799182/) each time we post a new entry.
At a gathering of central bankers in Hong Kong on Tuesday, RBA Governor, Michelle Bullock claimed that household finances in Australia are holding up well, despite 4.25% of rate hikes. The rookie RBA governor appears even more out of touch than her predecessor.
“Households and businesses in Australia are actually in a pretty good position. Their balance sheets are pretty good”, she said.
“We’ve been surprised a little bit on the strength of activity. It’s held up a little better than we thought. That’s meant that services price inflation has held up a bit more. So what we’re observing is a bit more domestic price pressures than we’d expected”.
Bullock pointed to the $300 billion in excess savings built up over the pandemic and rising house prices as reasons behind the resilience in consumer spending.
The reality is not nearly as rosy as Bullock claims. Aggregate household spending is holding up first as population is growing at a record pace because of the Albanese government’s record immigration program, which saw an estimated 500,000 net migrants land in Australia in 2002-23. Yet, Individual Australian households are cutting back on their expenditure.
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The Reserve Bank’s Monetary Policy Committee held the Official Cash Rate at 5.5% Wednesday in Wellington. This was as expected by most economists. But the central bank has been spooked by stronger near-term growth that’s being driven by the return of international students and immigrants after the pandemic.
As a result, there was a significant surprise, raising its forecasts for the OCR — implying a greater chance of an increase — and predicting no reduction until mid-2025.
This was the final policy meeting of the year and said it will hike them in 2024 if inflation doesn’t decelerate fast enough.
“We are confident we are restrictive with our monetary policy stance now and that provides us the ability to wait, to watch the data, but certainly highlight our willingness to move if we have to,” Governor Adrian Orr told reporters. “We are showing an upward bias to the interest rate, but it’s not a probability.”
Markets are out of kilter with the RBNZ, as Investors have in recent weeks ramped up bets that central banks globally, including the RBNZ, will pivot to rate cuts in the first half of 2024 as price pressures wane. But Orr said the RBNZ is concerned that inflation has been outside its 1-3% target band for so long, and that record immigration and a housing market recovery are adding to upside risks.
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