Aussie rates gotta go up, given the monthly inflation prints (see the inflation gauge, MoM, second row, second column, released today).
Economic analysis at the moment is lurching between “obvious and important” but highly contrary positions.
Builders going bust = pause!
Inflation, employment, house prices = hike!
Builders, new credit data, and house prices are in a difficult tension.
It is almost impossible to parse, at the moment.
We find, in situations like this, err on the side of caution. A goodly mix of rates and inflation beneficiaries. A good mix of defensives.
At the asset allocation level, spread the capital. A big bet on Aussie equities seems riskier than normal, based on these all but impossible to parse near term economic shifts (the lurches).
Longer run, the Achilles heel remains (the housing will-it-won’t-it bust), which again causes us to preference international over domestic equities.
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