Welcome to our May newsletter, and while the weather is cooling the economic and political landscape is heating up as the federal election campaign shifts into top gear ahead of the May 21 polling day.
The economic event that overshadowed all others in April was the release of the March quarter Consumer Price Index (CPI), which showed inflation up 2.1% in the quarter and 5.1% on an annual basis. This was the biggest lift in prices since 2001 and well above the Reserve Bank’s target of 2-3%. The biggest increases were for fuel, housing construction, and food as the war in Ukraine pushes up global oil prices and the cost of transporting food and other goods and Covid-19 related supply chain issues continue to impact.
On a positive note, unemployment fell below 4% in March, its lowest since 1974 as the economy continues to recover from COVID-related disruptions. As a result, businesses are more confident, with the NAB business confidence index lifting to a five-month high of 15.8 points in March, well above its long-term average of 5.4 points. Consumers are less confident, with the Westpac-Melbourne Institute consumer sentiment rating down 0.9% in April to a 19-month low of 95.8 points.
The Aussie dollar fell from US75c to around US71c over the month, adding to cost pressures on imported goods. Oil prices eased slightly, with Brent crude down 6% in April but up 48% on the year.
The Reserve lifted official interest rates by 0.25% p.a. on Tuesday from their current historic low of 0.1% to 0.35% p.a. The four major banks have announced they will pass on the full increase, and we expect the smaller banks and most other lenders to follow suit. These rate rises are from unsustainable emergency levels and will occur irrespective of which party forms Government after May 21, and further rate rises are anticipated. Responsible economic management will play a large part in how far future rate rises will need to go.
Wishing all the mothers out there a wonderful day next Sunday. I hope you get to spend some quality time with family and friends, or at least get to put your feet up and have some quality time for yourself.
Stuart Fitzpatrick and Excel Financial Advisors Pty Ltd are authorised representatives of Interprac Financial Planning Pty Ltd AFSL 246638 registered office at Level 8, 525 Finders Street, Melbourne VIC 3000. This advice may not be suitable to you because it contains general advice that has not been tailored to your personal circumstances. Please seek personal financial advice prior to acting on this information. Investment Performance: Past performance is not a reliable guide to future returns as future returns may differ from and be more or less volatile than past returns.