Economic and market news
In Australian economic news, the Reserve Bank of Australia decided to leave the official interest rate unchanged at 4.35 per cent. The ongoing pause was expected by markets, thanks to the slowing in recent inflation. However, the statement by the Bank (and associated new inflation and economic growth forecasts) made clear that the campaign to return inflation to the 2-3 per cent target is not yet over. In particular, it was stressed that there are still concerns about the ‘stickiness’ of services inflation thanks to wage and other price rises. The Governor suggested another increase in interest rates ‘cannot be ruled out’.
New data show that the Consumer Price Index rose 0.6 per cent in the December 2023 quarter (and 4.1 per cent annually), a fall from the 1.2 per cent rise in the September 2023 quarter. This was the smallest quarterly rise since Q1 2021.
New figures also show that the monthly inflation outturn fell further than anticipated to 3.4 per cent for the 12 months to end December, a significant deceleration from the 4.3 per cent to end-November and 4.9 per cent to end-October.
In global economic news, new forecasts from the International Monetary Fund suggest a ‘soft landing’ for the world economy. In its latest economic outlook, the IMF projected global growth of 3.1 per cent this year — the same pace as in 2023 and an upgrade from its previous forecast of 2.9 per cent.
It said, that the chance of a global recession have receded, inflation is easing faster than anticipated and is growth showing remarkable signs of resilience in the face of an unprecedented pace of monetary policy tightening.
In the United Kingdom, official interest rates were left on hold but policy committee members were split on the decision, in the face of data which show inflation fell significantly in the final months of 2023, and new forecasts that dramatically lower the expected path of inflation in the next two to three years.
In the United States, a strong labour market added nearly double the amount of jobs in January than had been expected. The data, and comments in a rare TV appearance by the Federal Reserve Chair, led markets to push back expectations of the first rate cut.
Australian indices
ASX 200: Was down 0.24 per cent over the week, to close at 7581.6 points on Tuesday.
All Ordinaries: Was down 0.33 per cent in the period, closing at 7808.9 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
|
93.94 |
3.79% |
+2 |
-8 |
+73 |
|
GTAUD5Y:GOV Australia Bond 5 Year Yield |
2.75 |
95.70 |
3.73% |
+2 |
-7 |
+53 |
|
GTAUD10Y:GOV Australia Bond 10 Year Yield |
3.00 |
91.01 |
4.12% |
+3 |
-1 |
+67 |
|
GTAUD15Y:GOV Australia Bond 15 Year Yield |
3.25 |
87.76 |
4.34% |
+3 |
+0 |
+55 |
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) |
|
4.35 |
+0 (6 February 2024) |
+0.25 (7 November 2023) |
3.35 |
Currencies (source:RBA)
As at the close on 6 February, the AUD/USD was down slightly, 1.42 per cent over the week, closing at 0.6515. The AUD/RMB was also down, 1.21 per cent, in the period, closing at 4.6866 on Tuesday.
Venture Capital
New data on the state of startup funding markets show that the local environment mirrored the global slowdown. Australian venture capitalreceived $3.5 billion in funding last year, less than half the $7.4 billion it got in 2022, and only around a third of the record $10.6 billion banked in 2021. There were only 413 deals recorded last year. Globally, venture capital investments saw a 38 per cent decline in 2023.
PERKii
Another milestone announcement from a Stoic investee, PERKiii Targeted-release Probiotics announced it has completed the acquisition of ProGel. PERKii says the purchase is strategic move to strengthen its position in the market, and secure essential technology for encapsulating its probiotics. ProGel will be a wholly-owned subsidiary.
Cardihab
Stoic investee Cardihab has received an ISO/IEC 27001 certification for its Information Security Management Systems. The certification showcases its unwavering dedication to safeguarding client data and continued commitment to upholding the highest security standards across the organization for all information assets.
Property
In property news this week, house prices are said to have 'edged up' as the economic outlook appears ‘less negative’. Nationally, property prices increased by 0.4 per cent, up from 0.3 per cent in December. This was the 12th straight month of rising values.
It was suggested that Sydney and Melbourne’s housing markets could fare better than expected this year as values stabilise and cooling inflation stokes pent-up demand. Demand from record immigration and the growing shortfall of property is also said to be outweighing the impact of higher interest rates.
New figures also show that office vacancy rates are at a 30 year high as work from home remains popular. The office vacancy rate has climbed to 14.8 per cent nationally – the highest in almost three decades and 50 per cent higher than the average – as older buildings along with those outside the CBD core are emptied by the new world of flexible work.
Exacerbating the situation is a wave of new supply coming into the market, just as demand weakens. As their leases expire, corporate tenants are apparently reassessing their workspace needs, responding to the rise in hybrid work arrangements and an uncertain outlook for growth.
