Australian Economy – A reasonably quiet month on the economic front as focus turned to the soon-to-be-held elections. The RBA continued their slow easing cycle as interest rates were cut to a low of 2.5%, but most of the data out for the month showed no surprises.
Global Economy – Steady growth in the US is more than evident with improvements in jobs, housing and manufacturing helping to lift the US economy further. Europe, UK, and Japan all seem to be returning to a fair growth profile with most areas of these economies growing at their fastest pace for years, though high unemployment across the Eurozone is still a major concern.
Investment Markets – Developed markets suffered a slight pullback from their recent highs with the US, Europe and Japan all seeing negative returns in August. The Australian market was more resilient with a 1.5% rise, but this was outdone by the bounceback of 5.5% in Chinese share prices.
Outlook – Talk of military action is not likely to affect markets too significantly, with the biggest worry more likely to be focussed around any Iranian response, including shutting down of key shipping lanes. As growth picks up and stabilises across the developed world and China, risks to growth will continue to abate, though signs of stress in SE Asia has some worried of a 1997 repeat. The low risk and low rate environment has pushed many markets to all-time highs, and with the election now over in Australia, local markets could well look to head in the direction of pre-GFC levels over the medium term.
S&P/ASX 200 – 12 months to 31 August 2013
Source: Core Equity Services