Market & Economic Update - July 2023

File: Economic & Market Update

Duration: 02:48

Date: July 6, 2023

00:01 Economic Review July 2023

00:05 Inflation and interest rates have dominated economic and financial news for the last month.

00:10 With the Reserve Bank of Australia lifting rates in June, markets and commentators were split on whether they would again lift rates or pause as they did in April.

00:19 Ultimately the RBA did pause, commenting that it “will provide some time to assess the impact of the increase in interest rates to date and the economic outlook.”

00:28 Looking globally the story is also on interest rates, with western governments struggling to get ahead of inflation.

00:33 The US, UK, Canada and New Zealand have all lifted interest rates above 5%, with the UK surprising markets with it’s latest increase of 0.5%.

00:40 This all points to the possibility of Australia being behind the curve compared to it’s peers.

00:45 The Australian share market continued its month-to-month seesaw, gaining 1.8% for the month, lifting the annual return to a healthy 14.78% for the year.

00:55 This was in line with global developed markets, which saw International Shares rise 2.4% for the month, contributing to an annual performance of 18.23%.

01:02 The strong sharemarket performance over the last 12 months comes off a low this time last year when investors grappled with the unexpected spike in inflation and the first rounds of interest rate rises off historic lows.

01:19 The monthly Consumer Price Index (CPI) indicator rose 5.6 per cent in the 12 months to May 2023, according to the latest data from the Australian Bureau of Statistics (ABS).

01:26 Michelle Marquardt, ABS head of prices statistics, said "This month’s annual increase of 5.6 per cent is the smallest increase since April last year.

01:34 While prices have kept rising for most goods and services, many increases were smaller than we have seen in recent months."

01:40 “When excluding…volatile items, the decline in inflation is more modest.

01:45 The annual increase for the monthly CPI indicator was 6.4 per cent in May, slightly lower than the rise of 6.5 per cent recorded in April.”

01:59 The Australian Dollar fluctuated up and down for the month in a range of 4.7%, finishing the month up at 0.6662 USD, a monthly increase of 1.54 US cents

02:08 Consumer confidence continued to deteriorate from 76.2 to 74.1 points.

02:13 The index has now spent over 18 weeks below 80 points, the longest stretch at this level since the 1990-91 Recession.

02:20 Unemployment dropped back in May slightly to 3.6%, nearing again its historic 50 year low, while the participation rate increased back to 66.9%.

02:27 The reversal of the April labour pressure reduction did not convince the RBA to continue with rate rises, despite this all occurring to the backdrop of high immigration.

02:36 Wage pressures continue to grow and the difficulty of judging the return to 2-3% inflation target without a significant recession has also increased.