Australian Economy – The mining tax is finally through. Compared to other resource nations, especially those in the developing world, who change ownership laws, local content laws and royalties at the drop of a hat, miners are probably quite pleased that the final version took 3 years and is somewhat watered down. There was a big surprise with Australia posting a trade deficit and less surprising was the slight rise in the unemployment rate. The persistent and high Australian dollar seems to be the bane of the economy, but with most other countries actively weakening their own currencies, it seems difficult to see how the AUD is going to weaken substantially (without the RBA or Canberra stepping up to the plate).
Global Economy – To the chagrin of the Germans, European leaders have turned on the printing presses - and they like it. Twice this month they have announced increases to the protection fund, which now stands at EUR700b, and by the time you read this it might even be higher. Japan has also joined in with the fun, announcing their own money printing plans with the desired results of higher liquidity and a lower yen. As the race to the white house heats up in the US, Republicans are probably having mixed feelings about the spate of improving data, as it will make their task of ousting Obama that much harder.
Investment Markets – March saw a bit of a divergence between returns from the big economies of the US and Japan and the rest of the world. With conditions improving in both economies, share prices are flagging a continuance of good news with US shares up 3% and Japanese shares up almost 4%. Chinese markets continue to be the laggard, seeing almost 7% erased from shareholders in the month of March. Aussie shares picked the middle ground posting a stable 0.9% return.
Outlook – It seems to be steady as she goes with markets showing some liking to the central bank stimulus coming out of Europe and Japan. Eyes have shifted temporarily away from Europe with markets trying to predict whether China can pull of a soft landing and whether improvements coming out of the US will be enough to keep the global economy ticking along. Spanish bond yield increases are hinting that Spain may soon take more of the global headlines (for all the wrong reasons), but the acceleration in liquidity might delay this for some time (or drag it out over the next few years - Athens style).
S&P/ASX 200 – 12 months to 31 March 2012
Source: Core Equity Services