As the year is drawing to a close, the big news from last week off course was last Monday’s US rate increase by 25 basis points. Market was expecting this for at least the last 2-3 months and with the latest strong jobs growth and inflation tracking above 2%, the rate rise was widely expected and priced in. Governor Yellen said that further rate rises will be gradual and by the end of 2016, the forecast is for the cash rate to rise from the current 0.375% to 1.375%.
aussie dollar down - gold weaker
The Aussie dollar fell marginally on the back of the US rate move but mainly impacted by falling commodity prices. Strengthening of the US Dollar impacted on the prices of spot gold which fell to USD 1065 per ounce.
australia budget deficit blows out
The Midyear economic review was published by the Treasurer Scott Morrison last week. Key features:
- Budget deficit up from $35.1b to $37.4b in 2015-16
- Real GDP growth wound back from 2.75% to 2.50% in 2015/16, future year growth rate cut
- Unemployment for next year is projected to fall to 6%
- Savings on welfare frauds, cuts to pathology bulk billing incentives and to aged care services
- Spending of $1.1b on innovation and $1.3b on asylum related expenses/intake of Syrian refugees.
These numbers are likely to come under further pressure as iron ore prices have fallen to $35 whereas the mid-year review were based on USD 39 a ton. The Government also has pushed out returning the bottom line to black by a year to 2020-21.
- Budget deficit up from $35.1b to $37.4b in 2015-16
- Real GDP growth wound back from 2.75% to 2.50% in 2015/16, future year growth rate cut
- Unemployment for next year is projected to fall to 6%
- Savings on welfare frauds, cuts to pathology bulk billing incentives and to aged care services
- Spending of $1.1b on innovation and $1.3b on asylum related expenses/intake of Syrian refugees.
These numbers are likely to come under further pressure as iron ore prices have fallen to $35 whereas the mid-year review were based on USD 39 a ton. The Government also has pushed out returning the bottom line to black by a year to 2020-21.
MARKET UPDATE
| Australia Cash rate Australia 90 d bank bill (mid) 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 Crude(USD per BBL) Gold Spot (USD per oz) | THIS WEEK 2.00 2.35 2.797 2.21 0.7134 0.6576 87.25 4.6248 5083 2005 17128 3578 36.42 1065 | LAST WEEK 2.00 2.3450 2.85 2.15 0.7246 0.6627 88.44 4.6741 4954 2012 17265 3441 37.85 1073 |
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