I caught up with journalist Tarric Brooker for a look back over the year, and what might be up in 2025, including of course some great slides.
We dwelt on housing and Government policy, the structure of the economy and what might be underlying the dire numbers reported recently. How much is spin and how much is real?
You can catch Tarric’s work at https://www.burnouteconomics.com/
The latest slides are here: https://www.burnouteconomics.com/p/dfa-chart-pack-christmas-special
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Digital Finance Analytics (DFA) Blog
A Bet On Australia Is Bet On Government: With Tarric Brooker
I caught up with journalist Tarric Brooker for a look back over the year, and what might be up in 2025, including of course some great slides.
We dwelt on housing and Government policy, the structure of the economy and what might be underlying the dire numbers reported recently. How much is spin and how much is real?
You can catch Tarric’s work at https://www.burnouteconomics.com/
The latest slides are here: https://www.burnouteconomics.com/p/dfa-chart-pack-christmas-special
http://www.martinnorth.com/
Details of our one to one service are here: https://digitalfinanceanalytics.com/blog/dfa-one-to-one/
Go to the Walk The World Universe at https://walktheworld.com.au/
There was always going to be a question about the Fed’s December decision, would they react to the latest data, or position ahead of the Trump 2.0 policy set coming in 2025? Well, it looks like both were in the minds of the Monetary Policy committee, as Federal Reserve officials lowered their benchmark interest rate for a third consecutive time, but reined in the number of cuts they expect in 2025, signaling greater caution over how quickly they can continue reducing borrowing costs.
The Federal Open Market Committee voted 11-1 on Wednesday to cut the federal funds rate to a range of 4.25%-4.5%. Cleveland Fed President Beth Hammack voted against the action, preferring to hold rates steady.
Markets fell heavily in the US, and Asia, with the DOW and SP500 down more than 2.5% and the NASDAQ more than 3.5% lower. This was the largest post FED market move in 4 years. Falls were widespread. The ASX 200 slid 1.7%.
Bonds were stronger, . The US two-year note’s yield, more sensitive than longer maturities to Fed policy shifts, led the move in Treasuries, rising as much as eight basis points to 4.33%, the highest level since Nov. 25. and the US dollar rose, with the DXY up to 108.10.
The moves have reignited questions about how far central banks across Asia are willing to go to defend their currencies — and how much impact their moves will have. Indonesia’s central bank said on Thursday that it was intervening to push back against a selloff in the rupiah, while the People’s Bank of China used its daily reference rate to support the yuan.
Weaker currencies tend to raise the price of imports to a country, fueling domestic inflation. Further rate cuts could also put more pressure on currencies as investors look elsewhere for returns, exacerbating the impact of dollar strength.
Not good for chances of an RBA rate cut in 2025.
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Digital Finance Analytics (DFA) Blog
Dollar Taking No Prisoners As Fed’s Hawkish Cut Spooked Markets!
Total budget revenue is cumulatively higher by about $380 billion over five years compared with Treasury’s forecasts on the eve of the May 2022 election.
Yet, at a time when revenue is booming and the economy is operating around full capacity, the deficit in underlying terms is forecast to be $26.9 billion (1 per cent of gross domestic product), a $1.3 billion improvement since the May budget.
Cumulative underlying deficits over four years are projected to blow out to $144 billion, $21.7 billion worse than expected seven months ago.
Where are the adults in the room because from the budget point of view, they appear to have left years ago, and the result will be more pressure on ordinary households and businesses across the country.
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Digital Finance Analytics (DFA) Blog
Wanted Adults In The Budget Room, As Deficits Roar And Games Are Played!
This is our weekly market update, where we start in the US, cross to Europe and Asia and end in Australia, covering commodities and crypto along the way. MSCI’s global equity gauge fell on Friday while bond yields climbed as investors waited for clues about the future path for interest rates and Europe’s STOXX 600 index closed down 0.53% earlier, breaking a three-week winning streak, as investors sought clarity on Europe’s rate policy amid concerns about economic growth and a potential trade war.
As we run down to the end of the year, a flurry of Central Bank rate announcements signalled a confusing picture, with the RBA holding, the ECB cutting as expected, alongside Denmark at 25 basis points, and Swiss Bank cutting unexpectedly as it sought to head off gains in its currency along with Canada both doing a bigger 50 basis point cut. Next week, we have more Central Bank action, with the Federal Reserve, Bank of England and Japan all joining the party. While investors are betting on a quarter point rate cut at next week’s Federal Reserve policy meeting, expectations are rising that the pace of rate cuts is poised to slow, with an 80% probability of a hold in January, while cuts in the UK and Japan are not expected. So, you can see monetary policy is all over the shop.
The shadow of president-elect Trump’s pledge to impose hefty tariffs on imports from around the globe, especially China, as well as his promise for massive corporate tax cuts haunts the markets. These policies are seen as fueling inflation, which has been proving sticky even before Trump’s plans are enacted.
Finally, Bitcoin was once again touching $100,000 US, as Bitcoin proponent Michael Saylor tweeted: “We are all competing for $45m in #Bitcoin mined daily.”
Curiously, earlier this week, another big Bitcoin supporter and maximalist, the chief executive at JAN3, Samson Mow, shared that he expects miners to stop selling the BTC they mint in the near future. He urged the market to be prepared for that and plan their Bitcoin accumulation accordingly. Earlier this week, Saylor commented on a Bitcoin warning tweet published by Binance founder CZ. Changpeng Zhao issued a major reminder that more than 19 million Bitcoin from 21 million have been mined already. Saylor tweeted that the crypto space is running out of Bitcoin. It was last at 101,300, and will likely wobble around this level for some time.
Given significant uncertainty ahead, markets are generally overvalued, and prone to volatility and potential falls, so cash returning 4 or 5 percent relatively risk free might look a good option for now!!!
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Australia’s unemployment rate unexpectedly fell in November as the nation’s golden streak of hiring gains extended, underscoring the resilience of the labor market to elevated interest rates and prompting traders to pare back bets of a February cut.
As Alex Joiner from IFM noted “Solid employment Growth in November and a tick down in the participation rate sees the unemployment rate get back down below 4%. It seems the RBA doesn’t particularly need to be in a hurry to cut rates, a February move still has a lot of optionality. It was a big full time number is encouraging and underscores a very solid print”.
Employment grew 0.2 per cent in November 2024, following an average monthly rise of 0.3 per cent since the middle of 2024, in line with recent population growth. “The recent growth in population has boosted the labour supply as employment has kept up with population growth,” the ABS noted.
Compared with Canada, the Eurozone and US, Australia seems stuck with higher inflation, yet the jobs market stays strong. This suggests the labour market continues to be relatively tight,” the ABS said.
Nothing here to suggest the RBA will cut soon. More pressure on households.
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Digital Finance Analytics (DFA) Blog
Early Rate Cut Hopes Dashed By Strong Australian Jobs Data!
The Reserve Bank left its cash rate at 4.35% on Tuesday in a widely anticipated decision, marking more than a year at that level. The rate-setting board said “some of the upside risks to inflation appear to have eased” and scrapped a longstanding line that it wasn’t ruling anything in or out on policy. Australia’s central bank said it’s “gaining some confidence” that inflation is moving sustainably toward target, prompting traders to boost bets on interest-rate cuts starting as early as February.
That said, with the CPI up 16% over 3-years and the real costs much higher to households, this will be seen as a further dampener on household spending and confidence. Other reports recently have been highlighting the pressures on households as I discussed yesterday.
Asked what she had made of the new arrangements in her first full year of press conferences, the governor said it’s been “a bit of a wild ride for me.” Households could rightly say the same!
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Digital Finance Analytics (DFA) Blog
The RBA’s “Wild Ride”, While Rates Remain On Hold…
It has been another eventful week, for property insider Edwin Almeida and I to get our teeth into. What is the true state of the property market? How stuffed in Australia and Australians? And does crypto offer an alternative? Find out in our latest edition.
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Once in a while I find an article which really hits home. One such is an article in the AFR by John Kehoe, titled “Australia’s Economic Problems Have Been Brewing For Years”.
Indeed, bad policy from multiple Governments have gotten us to a bad place, and the current mob are making things worse. There are alternatives. But that would require braver leaders, and informed voters! What are the chances?
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The RBA meets Tuesday, with economists and markets predicting no change to rates. Indeed, not til later next year will rates likely come down, barring some external shock. Governor Michele Bullock said last month that inflation remains too high to consider a cut in the near term.
At the heart of the problem is the Governments spending a greater share of the economy, and stoking jobs in the public and related sector, like healthcare. States are also spending like drunken sailors, and the federal government is throwing more money at households via the electricity subsides. This is all inflationary.
On the other hand, the RBA did not take the cash rate as high as many other central banks did. As a result we have a shallower path, dodging a recession by the rate water torture will continue for longer. The upshot has been a cautious central bank that has kept the cash rate at 4.35% for the past year. By comparison, the Federal Reserve may cut for a third straight meeting this month.
So we will muddle through into 2025, and possibly face an election with rates at 4.35%. This could well become a cat fight with the RBA caught in the muddle, sorry middle.
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Digital Finance Analytics (DFA) Blog
The RBA Faces Mixed Signals, But Will Likely Stand Firm On Rates…
