The Aus GDP data is out.
Overall, it is just a little too backward looking, at the moment, given rate hikes, and sectorally uneven global growth dynamics.
Still, QoQ GDP is the weakest in a while.
I remain pretty sure the domestic demand picture moving forward is not a robust one (noting that is what kept us out of recession in this current period).
You can see how non experts (as in, a fully fledged academic) get confused by what drives what, what causes what. Wages and productivity are linked. Real rates and productivity are linked. Productivity is weak, raise the rates to moderate these unproductive use cases.
Before you know it, you are lost in a sea of accounting identities.
Still, I would take it as “productivity is poor, we are putting all our money into housing again, the RBA will keep rates tighter until productivity lifts and housing demand falls”.
That’s reflected in the assumption for rates, near term, with a peak sometime in October.
Remember that policy operates with a lag. Thus, all the weakness we are seeing in credit demand, building approvals, retail (depending mightily on who you are looking at), reflects rates from as much as a year ago.
So, recent tightening will weigh on activity ahead.
For that reason, we remain defensively positioned within our direct Australian share exposures. Maybe things will be fine, in which case we will do okay, but likely less than the benchmark. We are comfortable with that.
Important Information: This document has been prepared by Aequitas Investment Partners ABN 92 644 165 266 (“Aequitas”, “our”, “we”), a Corporate Authorised Representative (no. 1284389) of C2 Financial Services, (Australian Financial Services Licensee no. 502171), and is for distribution within Australia to wholesale clients and financial advisers only.
This document is based on information available at the time of publishing, information which we believe is correct and any opinions, conclusions or forecasts are reasonably held or made as at the time of its compilation, but no warranty is made as to its accuracy, reliability or completeness. To the extent permitted by law, neither Aequitas nor any of its affiliates accept liability to any person for loss or damage arising from the use of the information herein.
Please note that past performance is not a reliable indicator of future performance.
General Advice Warning: This document has been prepared without taking into account your objectives, financial situation or needs, and therefore you should consider its appropriateness, having regard to your objectives, financial situation and needs. Before making any decision about whether to acquire a financial product, you should obtain and read the relevant Product Disclosure Statement (PDS) or Investor Directed Portfolio Service Guide (IDPS Guide) and consider talking to a financial adviser.
Taxation warning: Any taxation considerations are general and based on present taxation laws and may be subject to change. Aequitas is not a registered tax (financial) adviser under the Tax Agent Services Act 2009 and investors should seek tax advice from a registered tax agent or a registered tax (financial) adviser if they intend to rely on this information to satisfy the liabilities or obligations or claim entitlements that arise, or could arise, under a taxation law.