This past weekend, the world witnessed Chaos and Revolution in Sri Lanka with the storming of Sri Lanka’s Presidential Palace. The Sri Lankan economy has collapse and this has resulted in societial chaos and a political revolution with the Sri Lankan president fleeing the country. Why did it happen? How is this relevant for Australia?
The lessons for Australia are very real and Adams and North will come back to Australia’s foreign debt problems in the coming months.
Go to the Walk The World Universe at https://walktheworld.com.au/
Big moves on the US$ ahead of the upcoming CPI data has cast a long shadow over the markets. And later we will also see the moves from New Zealand and Canada regarding further rate hikes.
Meantime, the US results season, and more COVID suggests a recession is becoming more likely, as the main gas pipeline to Germany is cut due to scheduled maintenance. And crypto falls some more.
A big week of market news!
Today’s post is brought to you by Ribbon Property Consultants.
If you are buying your home in Sydney’s contentious market, you do not need to stand alone. This is the time you need to have Edwin from Ribbon Property Consultants standing along side you.
Buying property, is both challenging and adversarial. The vendor has a professional on their side.
Emotions run high – price discovery and price transparency are hard to find – then there is the wasted time and financial investment you make.
Edwin understands your needs. So why not engage a licensed professional to stand alongside you. With RPC you know you have: experience, knowledge, and master negotiators, looking after your best interest.
Shoot Ribbon an email on info@ribbonproperty.com.au & use promo code: DFA-WTW/MARTIN to receive your 10% DISCOUNT OFFER.
As expected, the Reserve Bank In New Zealand lifted the official cash rate by another 0.5% to hit 2.5%
They said The Monetary Policy Committee agreed it remains appropriate to continue to tighten monetary conditions at pace to maintain price stability and support maximum sustainable employment. The Committee is resolute in its commitment to ensure consumer price inflation returns to within the 1 to 3 percent target range.
The latest edition of our finance and property news digest with a distinctively Australian flavour.
Go to the Walk The World Universe at https://walktheworld.com.au/
There was an outstanding piece from John Authers this week arguing that the Age of Credibility for Central Banks Is over as Inflation blunders have destroyed the trust that’s anchored the global financial system since the end of the gold standard.
Certainly, in Australia, the RBA has been on shaky ground for many years, including over forecasting wages growth, taking interest rates too low, and relying on household wealth to be artificially inflated by poor policy for years. But the shocking reversal from last November’s no rate rises til 2024, to todays 1.35% target cash rate, with more to come, shows just how far from credible they are – despite politicians still talking about mountains of respect. Over in New Zealand they are further up the curve, but the issues are the same. Central Bank credibility is shot.
It appears that the most likely anchor to replace central bank credibility is confidence in governments. But that is not a comforting thought.
Go to the Walk The World Universe at https://walktheworld.com.au/
There was an outstanding piece from John Authers this week arguing that the Age of Credibility for Central Banks Is Over as inflation blunders have destroyed the trust that’s anchored the global financial system since the end of the gold standard.
Certainly, in Australia, the RBA has been on shaky ground for many years, including over forecasting wages growth, taking interest rates too low, and relying on household wealth to be artificially inflated by poor policy for years. But the shocking reversal from last November’s no rate rises til 2024, to today’s 1.35% target cash rate, with more to come, shows just how far from credible they are – despite politicians still talking about mountains of respect. Over in New Zealand they are further up the curve, but the issues are the same. Central Bank credibility is shot.
It appears that the most likely anchor to replace central bank credibility is confidence in governments. But that is not a comforting thought.
Go to the Walk The World Universe at https://walktheworld.com.au/
Atlanta Fed President Raphael Bostic, until recently among the central bank’s most dovish policymakers, said on Friday he “fully” supports another 75-basis-point rate rise later this month.
Speaking later on Friday, New York Federal Reserve President John Williams did not specify if he favors a half point or three-quarter point increase at the Fed’s upcoming July meeting, but acknowledged rising interest rates were affecting the economy.
[Content]
0:00 Start 0:15 Introduction 0:27 Recession Obsession 1:35 US Non Farm Payrolls 4:45 US Markets 10:15 Gold 10:35 European Markets 12:00 Oil 12:40 Asian Markets 14:20 Australian Markets 16:15 May Trade Surplus 18:30 Market Trends 21:25 Crypto 22:15 DXY 22:35 Summary and Close
Go to the Walk The World Universe at https://walktheworld.com.au/
While the technical definition of a recession traditionally is two quarters of contraction or negative growth, I think that definition is frankly irrelevant given where we are today.
You simply have to look at the trends in consumer confidence, which are ultra-low in many western countries, from Australia, New Zealand, the UK and the US. And what is driving this is the concern about inflation – which is why central banks are jaw-boning their ability to get inflation under control. Quite simply, people’s money is disappearing fast, and they’re worried it could get a lot worse.
By the way, pause for a moment to ask why a 2-3% inflation target is used – it have become a convention, but there is little to explain why that number is correct. The truth is, that number was grabbed from thin air years ago, and has taken on a life of its own.
Note that Goldman Sachs Group Inc. economists put the risk of such a slump in the US in the next year at 30%. Others put the probability considerably higher, with the risks building beyond that time frame. But for many it already feels like it’s here.
Go to the Walk The World Universe at https://walktheworld.com.au/
Today’s post is brought to you by Ribbon Property Consultants.
If you are buying your home in Sydney’s contentious market, you do not need to stand alone. This is the time you need to have Edwin from Ribbon Property Consultants standing along side you.
Buying property, is both challenging and adversarial. The vendor has a professional on their side.
Emotions run high – price discovery and price transparency are hard to find – then there is the wasted time and financial investment you make.
Edwin understands your needs. So why not engage a licensed professional to stand alongside you. With RPC you know you have: experience, knowledge, and master negotiators, looking after your best interest.
Shoot Ribbon an email on info@ribbonproperty.com.au & use promo code: DFA-WTW/MARTIN to receive your 10% DISCOUNT OFFER.
Digital Finance Analytics (DFA) Blog
The Disappearing Money Trick - Or Why The Recession Is Already Here! [Podcast]
While the technical definition of a recession traditionally is two quarters of contraction or negative growth, I think that definition is frankly irrelevant given where we are today.
You simply have to look at the trends in consumer confidence, which are ultra-low in many western countries, from Australia, New Zealand, the UK and the US. And what is driving this is the concern about inflation – which is why central banks are jaw-boning their ability to get inflation under control. Quite simply, people’s money is disappearing fast, and they’re worried it could get a lot worse.
By the way, pause for a moment to ask why a 2-3% inflation target is used – it have become a convention, but there is little to explain why that number is correct. The truth is, that number was grabbed from thin air years ago, and has taken on a life of its own.
Note that Goldman Sachs Group Inc. economists put the risk of such a slump in the US in the next year at 30%. Others put the probability considerably higher, with the risks building beyond that time frame. But for many it already feels like it’s here.
Go to the Walk The World Universe at https://walktheworld.com.au/
Today’s post is brought to you by Ribbon Property Consultants.
If you are buying your home in Sydney’s contentious market, you do not need to stand alone. This is the time you need to have Edwin from Ribbon Property Consultants standing along side you.
Buying property, is both challenging and adversarial. The vendor has a professional on their side.
Emotions run high – price discovery and price transparency are hard to find – then there is the wasted time and financial investment you make.
Edwin understands your needs. So why not engage a licensed professional to stand alongside you. With RPC you know you have: experience, knowledge, and master negotiators, looking after your best interest.
Shoot Ribbon an email on info@ribbonproperty.com.au & use promo code: DFA-WTW/MARTIN to receive your 10% DISCOUNT OFFER.
At its meeting today, the Board decided to increase the cash rate target by 50 basis points to 1.35 per cent. It also increased the interest rate on Exchange Settlement balances by 50 basis points to 1.25 per cent.
NOTE this means the Banks will be getting an evening bigger windfall from the TFF facility – time to impose a windfall tax!
Global inflation is high. It is being boosted by COVID-related disruptions to supply chains, the war in Ukraine and strong demand which is putting pressure on productive capacity. Monetary policy globally is responding to this higher inflation, although it will be some time yet before inflation returns to target in most countries.
Inflation in Australia is also high, but not as high as it is in many other countries. Global factors account for much of the increase in inflation in Australia, but domestic factors are also playing a role. Strong demand, a tight labour market and capacity constraints in some sectors are contributing to the upward pressure on prices. The floods are also affecting some prices.
Inflation is forecast to peak later this year and then decline back towards the 2–3 per cent range next year. As global supply-side problems continue to ease and commodity prices stabilise, even if at a high level, inflation is expected to moderate. Higher interest rates will also help establish a more sustainable balance between the demand for and the supply of goods and services. Medium-term inflation expectations remain well anchored and it is important that this remains the case. A full set of updated forecasts will be published next month following the release of the June quarter CPI.
The Australian economy remains resilient and the labour market is tighter than it has been for some time. The unemployment rate was steady at 3.9 per cent in May, the lowest rate in almost 50 years. Underemployment has also fallen significantly. Job vacancies and job ads are both at very high levels and a further decline in unemployment and underemployment is expected over the months ahead. The Bank’s business liaison program and business surveys continue to point to a lift in wages growth from the low rates of recent years as firms compete for staff in the tight labour market.
One source of ongoing uncertainty about the economic outlook is the behaviour of household spending. The recent spending data have been positive, although household budgets are under pressure from higher prices and higher interest rates. Housing prices have also declined in some markets over recent months after the large increases of recent years. The household saving rate remains higher than it was before the pandemic and many households have built up large financial buffers and are benefiting from stronger income growth. The Board will be paying close attention to these various influences on household spending as it assesses the appropriate setting of monetary policy.
The Board will also be paying close attention to the global outlook, which remains clouded by the war in Ukraine and its effect on the prices for energy and agricultural commodities. Real household incomes are under pressure in many economies and financial conditions are tightening, as central banks increase interest rates. There are also ongoing uncertainties related to COVID, especially in China.
Today’s increase in interest rates is a further step in the withdrawal of the extraordinary monetary support that was put in place to help insure the Australian economy against the worst possible effects of the pandemic. The resilience of the economy and the higher inflation mean that this extraordinary support is no longer needed. The Board expects to take further steps in the process of normalising monetary conditions in Australia over the months ahead. The size and timing of future interest rate increases will be guided by the incoming data and the Board’s assessment of the outlook for inflation and the labour market. The Board is committed to doing what is necessary to ensure that inflation in Australia returns to target over time.
The RBA is widely expected to lift the cash rate again today, perhaps to 1.35% — a level not seen since May 2019. Market Economics is forecasting a larger 75-basis-point move.
The RBA is behind its peers, having held rates near historic lows until increases in May and June that lifted its benchmark by a total 75 basis points to 0.85%. A 50-basis -point hike on Tuesday would mark the first time Australia has hiked by that amount at consecutive meetings.
Morgan Stanley, expects 50-basis-point increases in July and August, followed by quarter-point hikes through to November, taking the cash rate to 2.6%.
“Broader slowing of jobs and inflation won’t be felt until late this year, keeping 2H22 rate hikes on track, even as risks grow for 2023,” he said.
You can join my live show at 8pm Sydney when I discuss the outcome with Chris Bates, mortgage broker in Sydney. https://youtu.be/xur8dSSFcTw
Go to the Walk The World Universe at https://walktheworld.com.au/
Today’s post is brought to you by Ribbon Property Consultants.
If you are buying your home in Sydney’s contentious market, you do not need to stand alone. This is the time you need to have Edwin from Ribbon Property Consultants standing along side you.
Buying property, is both challenging and adversarial. The vendor has a professional on their side.
Emotions run high – price discovery and price transparency are hard to find – then there is the wasted time and financial investment you make.
Edwin understands your needs. So why not engage a licensed professional to stand alongside you. With RPC you know you have: experience, knowledge, and master negotiators, looking after your best interest.
Shoot Ribbon an email on info@ribbonproperty.com.au & use promo code: DFA-WTW/MARTIN to receive your 10% DISCOUNT OFFER.
