Josh Gilbert, market analyst at eToro, shares his three things to watch in Australia in the coming days.
1. RBA rate decision
There was an early Christmas surprise for the RBA through the week, with inflation coming in under expectations and retail sales slowing, taking some weight off Michele Bullock to hike rates again.
The RBA still has the potential to be the Grinch next week, should they decide to deliver one final hike to see out 2023.
Right now, the likelihood of that is fairly low – but the Governor has maintained a hawkish tone in recent weeks. Specifically, Bullock has spoken about homegrown inflation being more persistent than expected, which will certainly keep markets on edge heading into Tuesday’s decision.
The good news for investors is that overall, markets still see a very low chance of there being a hike this week. However, that doesn’t mean there isn’t the potential for another hike early next year if key data points don’t move in the right direction.
Given that a hike is unexpected, the focus is likely to be on the statement following the decision. We’re unlikely to see any lighter tone from the RBA and Michele Bullock's hawkish rhetoric may be front and centre once again.
2. Australian GDP
This coming Wednesday marks the release of the quarterly Gross Domestic Product (GDP) rate by the ABS. Markets will be hoping for another set of relatively positive results following September’s data matching the forecast 0.4% rate.
September’s results were welcome news after June produced the weakest result since the COVID-19 Delta lockdown contraction in September 2021.
There are some potential impacts to consider ahead of Wednesday’s reading; retail sales have slowed following a relatively quiet October and a seemingly underwhelming Black Friday period, with plenty of households keeping the purse straps tight as supermarket prices continue to climb.
Economists broadly will be expecting GDP growth of around 0.4%, which right now, seems more than tenable.
3. Chinese Inflation
Last month, China fell into deflation for the second time in 2023 as consumers continue to hold back their spending due to a deepening property crisis in the region. The region’s bad news continues to stack, with weaker-than-expected manufacturing data being handed down this week.
However, bleak outlooks from China isn’t always as bad as it seems, as it often kickstarts chatter around more stimulus measures being rolled out. Recent stimulus measures for the property sector are good news on inflation, given that they should help to reduce the impact on household pressures such as wages and employment and therefore improve consumption.
That said, the expectation for now is that the region will remain in deflation. The consensus next week is for CPI to come in at -0.2%, reflecting the ongoing struggles and solidifying China as the market disappointment of 2023.