FIG AVENUE INVESTMENTS

Australian economy

With a tight labour market, Australia's unemployment rate is nearing all-time lows (essentially 'full employment'). At the same time, the trade surplus remains exceptionally healthy (albeit down about 40% from its recent highs) and consumer confidence is positive (though, perhaps only marginally so). On the flip side, consumer prices in Australia have continued to increase beyond comfortable levels with real economic growth becoming stagnant¹.   

International economy

Surprisingly strong economic growth figures and a large increase in employment have highlighted the high speed at which the US economy is currently running¹. The very high rate of inflation is also indicative of this, though highlights the risks of running historically high federal deficits (on top of the large increase in private debt over the past few years). While inflation may be somewhat lower across the Atlantic, the pandemic recovery is still struggling to get going in some parts of Europe, with Eastern countries, in particular, still suffering with high levels of Covid disruptions.

Investment Markets

The start to 2022 saw a broad market sell-off, with many equity markets reversing by more than 5%. Australian equities were down around 6%; in line with the likes of the US, Japan and China. Despite their economic struggles and the threat of war on their doorstep, European markets have shown relatively good returns over the past few months².

Outlook

The further opening up of Australia's borders to foreign workers should reduce some of the pressure on the labour market and be an overall boost to the local economy. Inflation is still the major dark cloud on the horizon, and this is in light of the potential for a globally disruptive war.

S&P/ASX200 - 12 months to 31 January 2022