News
Wealth Pi Fortnightly Economic Snapshot
Interest Rates
Probability of rate decrease at next RBA meeting in September 2024 is at 50% for 25bp.
Interest Rates Outlook Update
The recent change in inflation data has shifted the interest rate outlook from a potential hike to a probable rate cut later this year or early next year. The RBA tracker now indicates a 20% probability of a rate cut at the next meeting, with financial markets pricing in a rate reduction by year-end. Contributing factors include slowing GDP growth, a consumer spending slowdown reflected in ASX200 reports, and decelerating wage growth. <br>
Global Rates:
- New Zealand: Recently cut rates by 25 basis points to 5.25%.
- UK: Cut rates by 25 basis points to 5% in early August.
- Other Global Trends: Canada, Switzerland, Sweden, and the European Central Union have also reduced rates this year. The US held rates steady, but a cut may come as soon as September.<br>
RBA Monetary Policy: The Reserve Bank of Australia’s August 2024 Statement on Monetary Policy highlights that inflation remains above target, with underlying inflation expected to return to the 2-3% target range by late 2025. The RBA kept the cash rate unchanged at 4.35%, citing persistent inflationary pressures, a strong labor market, and a resilient domestic economy. The bank remains cautious, monitoring upside risks to inflation while forecasting moderate economic growth and gradual easing in the labor market.
Australian Markets
Australian GDP grew only 0.2% in Q2, driven primarily by record federal spending. Australia recorded a current account deficit for the second consecutive quarter, driven by a decline in the value of exports, particularly in mining commodities, while import levels remained steady. This marks a shift from the previous trend of surpluses, reflecting changes in global demand and trade conditions.
Global Markets
US:
Homeowners Associations (HOAs) across the U.S. are increasingly regulating the display of flags and political signs, leading to debates over free speech and property rights. These regulations vary by state and community, often limiting the size, number, and type of signs or flags allowed. The issue has become particularly contentious in the current political climate, with homeowners navigating the balance between expressing their views and adhering to HOA rules.
UK:
Rents in major UK cities are beginning to decline after a period of significant growth, particularly in London, where high rental costs have started to push tenants towards more affordable areas. This shift marks the first notable drop in urban rents since the pandemic, reflecting changing demand patterns as affordability pressures increase.
Property
Australia saw a rise in building approvals in July 2024, primarily driven by a significant increase in apartment approvals, while approvals for houses remained steady. This trend highlights a shift towards higher-density living as urban development continues to grow.
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