Economic & Market Update December 2023

File: Economic & Market Update

Duration: 02:51

Date: December 13, 2023

00:01 Economic Review December 2023

00:04 At the beginning of December, the Reserve Bank of Australia decided to keep the cash rate target unchanged at 4.35%.

00:10 The decision to hold interest rates steady followed a recent increase, in response to inflation risks and stronger-than-expected economic performance in the first half of the year.

00:19 Inflation was showing signs of moderation, driven by the goods sector, but uncertainties remained about services inflation and the global economic environment, including the situation in China.

00:29 Looking Internationally, easing inflation raised hopes for a gentler Federal Reserve in 2024. Both Global Equities and Global Government Bonds rebounded strongly, with bonds seeing the best monthly return in over a decade.

00:39 UK Equities rose with small and mid-cap outperformance as inflation slowed sharply to 4.6%.

00:45 Japan’s share market rebounded, supported by a stronger yen and declining US Treasury yields.

00:51 While the rest of Asia ex-Japan experienced strong gains driven by renewed risk appetite, especially in South Korea and Taiwan.

00:57 The Australian share market had a very good month in November, gaining 5.03% for the month, securing a small positive return for the last year, growing 1.45% over 12 months.

01:05 This was in line to global developed markets, which saw International Shares climbed to 4.48% for the month, with an annual performance of 14.98%.

01:12 Continued softening in Inflation globally has forecasters and investors expecting less rate rises and even rate cuts earlier than previously.

01:18 These speculated rate cuts bumps up expectations of financial market performance, regardless of actual probabilities.

01:31 The Consumer Price Index (CPI) rose 4.9 per cent in the 12 months to October according to the latest data from the Australian Bureau of Statistics (ABS).

01:39 Leigh Merrington, acting ABS head of prices statistics, said: "The 4.9 per cent increase is down from 5.6 per cent in September and below the peak of 8.4 per cent in December 2022.”

01:46 “The most significant contributors to the October annual increase were Housing (+6.1 per cent), Food and non-alcoholic beverages (+5.3 per cent) and Transport (+5.9 per cent).

01:55 “"CPI inflation is often impacted by items with volatile price changes like Automotive fuel, Fruit and vegetables, and Holiday travel. It can be helpful to exclude these items from the headline CPI to provide a view of underlying inflation.

02:05 “When excluding these volatile items from the monthly CPI indicator, the annual rise in October is 5.1 per cent, lower than the annual rise of 5.5 per cent in September,” Mr Merrington said.

02:13 The Australian Dollar fluctuated up and down for the month in a range of 4.65%, finishing the month up at 0.6608 USD, a monthly increase of 0.03. US cents

02:19 Consumer confidence rose 4 points in November to 91.9, still a very subdued level. The future conditions index made up of forward-looking questions was unchanged, while the current conditions index rose 9 points.

02:29 Australia's seasonally adjusted unemployment rate inched up to 3.7% in October 2023, a slight acceleration from September's three-month low of 3.6%, aligning with the market consensus.

02:37 The participation rate rose to 67.0% from the previous 66.8%, exceeding forecasts of 66.7%.