Weekly Update 17.06.22

“Over the past couple of years people have put away an extra $250 billion – it’s a lot of money, and the saving rate is still high, and the number of people who’ve fallen behind in their mortgages is actually declining, not rising.”

–    RBA Governor Philip Lowe, ABC 7.30

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Parliamentary Update:

• The first National Cabinet Meeting following the election has been held.
• The Government has written to the UN Framework Convention on Climate Change to convey Australia’s enhanced 2030 Nationally Determined Contribution (a 43% emissions reduction target) under the Paris Agreement.
• The Prime Minister, Treasurer Jim Chalmers and Minister for Employment and Workplace Relations Tony Burke jointly released a statement welcoming the Fair Work Commission’s 5.2% rise in the minimum wage.
• The NSW and QLD State Budgets will both be delivered next Tuesday (21 June).

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Economic Update:

• The Fair Work Commission’s 5.2% minimum wage rise equates to an extra $40 per week. The national minimum wage will now be $812.60, or $21.38 per hour (up from $20.33 per hour), on 1 July. Award wage earners will have a 4.6% increase from October 1.
  • The Australian Chamber of Commerce and Industry said the decision will cost businesses an additional $7.9 billion in the year ahead.
  • The Council of Small Business Organisations Australia said the wage rise will leave small businesses concerned about the viability of their businesses.
  •  Ai Group said the decision will add fuel to the inflation fire.

• The seasonally adjusted unemployment rate remained at 3.9% in May 2022, according to ABS data released on Thursday.
• Three-year bonds rose 43 basis points in early trade on Wednesday to a decade high 3.7%, the largest single move since 2009.  Bond futures are implying that the cash rate will reach 3.6% by year-end.
• Consumer confidence has dropped dramatically. “Over the 46-year history of the survey, we have only seen index reads at or below this level during major economic dislocations” – Westpac chief economist Bill Evans.
• Four G20 Countries have inflation rates over 10%. Of note – Netherlands, Brazil & India have dropped, Turkey sits at 73.5%.
• Eight of the G20 central banks still have 0% or even negative (Switzerland, Japan) interest rates. At the other end of the scale, Argentina has implemented a rate of 49%.

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Regulatory Update:

• RBA Governor Philip Lowe gave a wide-ranging interview to ABC 7.30’s Leigh Sales. Topics included the RBA’s cash rate rises, his comments on interest rates remaining stable until 2024, and an expected 7% inflation rate by the end of 2022. Full transcript.
• APRA released their ADI statistics for March 2022. Key points: 
  • net profit after tax of $38.3 billion (+30.3%) up $8.9 billion in total,
  • increase of total assets to $5,757.7 billion (+10.6%),
  • new residential mortgage loans $145 billion (+14%).

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Selected Media:

• AFR – Goldman calls for 50bp RBA lifts in July, August and September
• The Aus – Consumer confidence down to recessionary levels
• AFR – Bond yields surge after hawkish RBA comments
• CNBC – Fed hikes benchmark by 0.75%, biggest since 1994

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17 June 2022Weekly Update