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Australian economy

Employment data missed expectations in February, with the Australian unemployment rate edging its way up to 3.7% over the past few months from its record lows. Business confidence, however remains optimistic, and Australia's balance of trade continues to be a strong engine for the Australian economy¹. 

International economy

Whilst the US GDP rate of growth has started to slow below trend, the US employment market continues show robustness. The number of jobs in the US jumped over 500,000 in the most recent data, whilst inflation continues to fall slowly. The war of attrition taking place in Ukraine, along with sanctions and energy import restrictions, has hampered economic activity in the EU, with GDP growing at minimal levels¹. 

Investment Markets

It was a mixed bag across capital markets over the past month with European equities showing the most resilience in finishing up around 2% whilst US and Australian share markets fell by over 2%. After jumping about 50% over the previous few months, February was less kind for Hong Kong based shares, reversing back about 10%². 

Outlook

With central bankers providing a more hawkish tone, the consensus for cash rates in Australia has jumped by about 0.5% since the start of the year. Should the US Fed continue as expected, cash rates in the US will top 5% and it will be difficult for the RBA to maintain such a large differential for too long. All eyes will be on how quickly such rate hikes will end.

S&P/ASX200 - 12 months to 28 February 2023