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Australian economy

After a somewhat surprising slowdown in the speed of interest rate hikes, the RBA continued to walk rates higher in their Melbourne Cup day meeting. Accordingly, business confidence has moved back toward negative territory whilst retailers are likely hoping for a bounceback in the holiday season after months of dwindling activity¹. 

International economy

Even with inflation dropping slowly, the US Federal Reserve is yet to take their foot off the interest rate accelerator with cash rates jumping another 0.75% in their early-November meeting. US 30-yr mortgage rates are now back at levels not seen since the lead up to the sub-prime mortgage crisis¹. Across the Pacific, Chinese interest rates have now moved below that of the US for the first time, which is a sign that Chinese economic conditions have yet to recover from Covid-19 and ongoing lockdowns.

Investment Markets

Equity markets had a strong November, with many markets up close to 10%. European and Chinese stocks, in particular, rebounded well from recent drops, as uncertainty around key economic dark clouds eased. In Australia, equities were up  over 6%, helping the market to erase much of the losses seen over the past 12 months².

Outlook

Most economists are predicting the RBA will pause the current rate hiking cycle in February or March of next year at around 3.5%. This is perhaps a little lower than what markets may have been worried about 3 months ago and highlights concerns about the impact the sharp rise in rates will have on mortgagees.

S&P/ASX200 - 12 months to 30 November 2022