As the last day of the first quarter of 2023 comes to a close, things are feeling rather more optimistic than they did just a few weeks ago.
“Maybe it is just window-dressing for the end of the quarter,” wrote Reuters’ Jamie McGeever, “but investors are driving risky assets higher across the board, doing their best to make the banking crisis of March 2023 look like a blip in the rear-view mirror.”
The ASX 200 had gained 0.82% by 2:30 pm AEDT on Friday, buoyed by a strong performance from Wall Street on Thursday. While tech once again led the way, US financials was the only sector of the S&P 500 to fall — though it remains up 3% for the week.
Gold prices were also up this week, thanks in part to a weaker US dollar and lower bond yields. The spot price was up almost 1% on Thursday at US$1980.83 per ounce — its highest since it touched US$1,984.19 on March 24.
Silver also rose 1.8% to US$23.76 per ounce, while platinum and palladium both jumped jumped 2% to US$986.59 and US$1467.87, respectively.
One last rate hike, maybe
If the mere mention of inflation has the same toe-curling effect on you as it does me, there is unwelcome news: Australia’s Reserve Bank is expected to hand out one last rate hike of 25 basis points to 3.85% on Tuesday.
While inflation rose to a three-decade high of 7.8% last quarter — way outside of the RBA’s 2-3% target range — more recent monthly figures suggest the worst may be behind us. A measure of Australian consumer prices, released on Wednesday, showed inflation had dropped to an eight-month low of 6.8% in February, down from 7.4% in January.
It’s a trend largely in line with the RBA’s assertion, following its March policy meeting, that it may be finished with its cycle of tightening — which took the shape of ten consecutive rate rises.
That, however, is something Australians have heard before. The RBA had previously said it would hold interest rates at 0.1% until 2024, only to start lobbing rate hikes in May last year.
RBA shake-up
That debacle, which angered no small number of home buyers, is likely a factor in the pending shake-up of the RBA. In what will be the largest review the institution has faced since the early 1990s, a three-member panel will recommend changes in the way the RBA operates and communicates with the public.
The final report, which is expected to hit Treasurer Jim Chalmers’ desk today, will likely suggest that interest rates be set by a committee of economic specialists, rather than current board members. There may also be fewer meetings to discuss rate settings, as well as more frequent press conferences by the RBA governor.
The fight for wage growth
With inflation continuing to outpace wage growth, Australian Prime Minister Anthony Albanese also weighed in today, saying minimum wage increases that match inflation would be welcomed by the government.
While Albanese said the Labor government’s submission to the Fair Work Commission (FWC) — which reviews minimum wage changes annually — would not contain a specific number, it’s up to the FWC as an independent tribunal to determine the range of factors.
Australian property market dodges a bullet
If this week’s news about inflation and wage growth and cash rates has left you in a state of uneasy confusion, as it has done to me, then let’s turn as remedy to Australia’s property sector.
The year-long slide in the value of house prices seems to have bottomed out, defying earlier predictions of a crash.
According to data from CoreLogic, prices in Australia’s eight capital cities have risen 0.8% since February, quelling concerns about a jump in distressed sales and offering some hope for a soft economic landing.
This will be the first monthly gain since April last year, shortly before the RBA tightened its monetary policy belt. Such a recovery trend is likely to continue if the RBA elects to wind back its campaign of rate hikes next week — though let’s not hold our breath.