With the arrival of the Chinese New Year, there is concern of the continuation of the economic slowdown which lends itself to a volatile year ahead not only for the Chinese economy but globally and more so locally here in Australia. The collapse of the mining investment, Australia's transition to a non-mining sector boost will be closely watched.
AUSTRALIAN GOVT BACKS DOWN ON GST INCREASE
PM Turnbull has ended the uncertainty of the GST increase by categorically ruling it out stating that he remains unconvinced that a GST increase will lead to any economic activity. He however confirmed that there are other tax reforms that will be included in the Budget in May.
RBA CAUTIOUSLY OPTIMISTIC ABOUT THE ECONOMY
The Reserve Bank in its quarterly economic update last week expressed cautious optimism about the Australian economy. The bank is convinced that non-mining sector is leading the revival of the economy replacing the decade long mining boom. The RBA has cited growth in job creation, low unemployment (reducing the levels from 6.5% to a range between 6-6.25%), low inflation and low value of the Dollar (assumed at 72 US cents) as its support for the outlook. The statement did say about the slowdown in the Chinese economy as a major factor that can impact on the forward outlook. The bank also said that the easing in the housing market will be only little. It will take a lot more convincing for the RBA to cut rates now and it appears that the cash rate will hold steady at 2% through 2016 in line with our earlier forecasts.
MARKET DATA
| Australia Cash rate Australia 90 day bank bill Australia 10 y bond US 10y Govt bond AUD/USD AUD/EUR AUD/JPY AUD/CNY ASX 200 S&P 500 Dow Jones Shanghai Composite Brent Oil (USD per BBL) Gold Spot (USD per oz) | AS OF 5 FEB 2.00 2.235 2.54 1.86 0.719 0.6423 83.91 4.7221 4971.2 1880.05 16204.97 2763.49 34.01 1167.94 | AS OF 29 JAN 2.00 2.285 2.63 1.92 0.71 0.6496 85.21 4.669 5044.7 1940 16466 2737.6 36.14 1117.6 |
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