Economic and market news
The key Australian economic and market news this week were new data on inflation in the September quarter. The headline rate of inflation (the Consumer Price Index (CPI)) rose 1.2 per cent in the September quarter and 5.4 per cent annually. The quarterly outturn was a significant acceleration from the 0.8 per cent rise in the June quarter, albeit lower than seen throughout 2022.
Most worryingly, the Reserve Bank of Australia (RBA)’s preferred measure of underlying inflation, which strips out volatile price movements such as for petrol and food, is also accelerating. The 1.2 per cent increase in that measure of inflation was considerably higher than the Bank’s implied forecast of 0.9 per cent for the period.
Commentators suggested that, for the sake of the RBA’s inflation-fighting credibility, the pick up in the underlying inflation will be ‘hard to ignore’ when the Bank’s Board meets on 7 November. This conclusion was bolstered by the new Governor's first speech, given this week, in which she reiterated that it would ‘not hesitate to raise the cash rate further if there is a material upward revision to the outlook for inflation’.
Surprisingly strong retail spending data also supported the ‘rate rise case’ – retail sales ‘sprang back to life’, rising by 0.9 per cent in September, up from 0.3 per cent recorded in August. This was the largest lift in monthly retail trade since January. It boosted the year-on-year rate of growth to 2 per cent, from 1.6 per cent. The uplift was attributed to the warmer than usual weather leading to spending on hardware, gardening, and clothing.
In a significant development in the United States, new data show that the economy grew by a ‘blockbuster’ 4.9 per cent in the September quarter, more than twice the 2.1 per cent in the three months to end-June. This acceleration in growth was attributed to higher wages fuelling consumer demand.
Despite this growth ‘spurt’, commentators suggested that the Federal Reserve may have ‘space’ to leave official interest rates on hold this month, because inflation in the US is said to be still ‘dissipating’.
Meanwhile, the European Central Bank paused in its rate rise campaign. It has raised interest rates at ten consecutive policy meetings since July 2022, by a cumulative 4.5 percentage points. The pause was said to be to allow the full impact of the monetary policy tightening to work through the economy, now that inflation is easing.
Australian indices
ASX 200: Dropped again this week, 1.11 per cent, to close at 6780.7 points on Tuesday.
All Ordinaries: Also fell 1.11 per cent over the week, closing at 6967.5 points on Tuesday.
Government Bonds
Government Bond Yields (Source: Bloomberg)
|
NAME |
COUPON |
PRICE |
YIELD |
1 DAY |
1 MONTH |
1 YEAR |
|
GTAUD2Y:GOV Australia Bond 2 Year Yield |
0.25
|
91.83 |
4.45% |
+3 |
+38 |
+123 |
|
GTAUD5Y:GOV Australia Bond 5 Year Yield |
2.75 |
92.00 |
4.53% |
+4 |
+40 |
+109 |
|
GTAUD10Y:GOV Australia Bond 10 Year Yield |
3.00 |
84.88 |
4.92% |
+5 |
+44 |
+117 |
|
GTAUD15Y:GOV Australia Bond 15 Year Yield |
3.25 |
79.46 |
5.17% |
+6 |
+46 |
+113 |
Reserve Bank of Australia (Source:RBA)
|
RBA CASH RATE TARGET (RBATCTR:IND) CURRENT (per cent) |
MOST RECENT DECISION (percentage points) |
MOST RECENT CHANGE (percentage points) |
1 YEAR PRIOR (per cent) |
|
4.10 |
No change (3 October 2023) |
+0.25 (6 June 2023) |
2.60 |
Currencies (source:RBA)
As at the close on 31 October, the AUD/USD had fallen again slightly over the week, 0.20 per cent, to 0.6346. The AUD/RMB was almost unchanged, down 0.06 per cent in the period, closing at 4.6436 on Tuesday.
Venture Capital
BioScout
Stoic investee BioScout announced a new project with New Zealand's Foundation for Arable Research to monitor crop diseases in the Canterbury Plains and further understand the benefits its technology can deliver to NZ growers.
Cardihab
Stoic investee Cardihab announced that it has been selected by Amazon Web Services to receive support for its ongoing ‘healthequity’ efforts. It will receive computing credits and technical expertise from Amazon Web Services to further facilitate its digital cardiac rehabilitation platform.
Morse micro
Stoic investee Morse Micro announced a partnership with Xailient Inc to use their AI-powered computer vision to create smarter, more power efficient, longer range, and more reliable smart camera systems.
Wildlife Drones
The CEO and founder of Stoic investee Wildlife Drones, Debbie Saunders, was honoured this week with the Innovation of the Year Award from Canberra Women in Business.
Property
New data show that potential buyers were ‘spooked’ by the chance of another increase in interest rates in November. The auction clearance rate fell to 68.5 per cent across the combined capital cities. This is 2.3 percentage points lower than the previous week and weaker than the average for this time of the year. However, it did come amidst a surge in the number of homes taken to auction, 3383, which is the largest volume since the week before Easter last year.
