Australian Economy – Lower interest rates and a falling $A may be helping to put a halt to the deceleration of the broader economy as indicated by the marginal decrease in the unemployment rate to 6.0%1 and a rise in business confidence. However, a sharp fall in consumer sentiment highlights Australia's precarious economic positioning.
Global Economy – A slight increase in the US unemployment rate was contradicted by another large increase in nonfarm payrolls2. This, along with steady growth in wages, is solidifying the likelihood of a rate increase in the US in the short-term. Elsewhere, the main news was the decision by Greek leaders to hold a referendum on debt negotiations, forcing Greek banks to begin capital controls and branch closures.
Investment Markets – The unknowns surrounding Greece and a reversal in China saw most markets struggle in June. The Australian equity market was down over 5% and Chinese equities were off over 7%3. The other major world equity markets were also all in negative territory.
Outlook – Continued unknowns surrounding Greece and the timing of US interest rate hikes are likely to lead to further spikes in volatility and downward pressure on markets. Growing concern over Chinese asset prices and debt levels is also likely to add to this dreary picture. Locally, however, the dual fall in interest rates and the $A could provide some buffer for domestic share prices.
S&P/ASX 200 – 12 months to 30 June 2015
Source: Core Equity Services
Footnotes: 1. Data from Australian Bureau of Statistics; 2. Dept of Labour, USA; 3. Bloomberg data.