MONEY MATTERS MONDAY 21st JANUARY 2019
Investments Should Improve on Last Year
Last year finished disappointingly for savers, super funds and retirees as explained last week. Shares here and overseas produced negative returns. So what is the outlook for 2019?
The main driver of share and commercial property markets is the Australian economy. It grew 2.8 per cent in the year to September. The Reserve Bank expects continuing growth of close to 3 per cent in 2019 and 2020. That’s healthy.
Inflation remains very low at 1.9 per cent and is unlikely to cause problems any time soon. Interest rates remain extremely low keeping the cost of borrowing low for both consumers to spend and businesses to expand. The Australian Budget is on track to return to surplus two years sooner than planned.
Our mineral exporters are receiving reasonable prices for their products. Most agricultural commodities are in strong demand and growers are receiving good prices. As a result of all this company profits are increasing moderately.
National economic drivers to keep an eye on
On the other hand unemployment is still a little high at 5.1 per cent but is slowly reducing with employment increasing. There is no sign of a wages breakout to push inflation up.
The drought continues through a very hot Summer, cutting agricultural production. There are elections in March in NSW and May Federally. They will cause a temporary slowdown in consumer spending, but it should pick up again quickly.
The December Quarter share market weakness had several causes: the US – China trade war; very low US unemployment and rising wages bringing fears of inflation and interest rate rises; the likely Brexit failure; and the US Government shutdown.
Last weekend we saw signs of conciliation from both sides in the trade war. China offered to import more US goods and the US was reported to be considering tariff rollbacks. Let’s hope conciliation continues as the problem could be a very big one if not resolved.
The latest figures from the US show inflation has only risen slightly and the Federal Reserve has said recently it is not on a pre-determined interest rate rise path. It says it will adjust its moves in response to economic developments.
The Brexit problem is certainly a serious problem for the British, but it is not really a problem for us. In fact, it will probably provide opportunities for Australia to increase our exports to the United Kingdom.
The US Government shutdown will also have minimal effect on Australia, and will eventually be resolved somehow.
With the Australian economy sound and business conditions good 2019 should be a reasonable year for investors, though bank deposit interest rates are unlikely to rise.
This is general advice and should not be treated as personal advice. Russell Tym is an authorised representative of MoneyLink Financial Planning Pty Ltd ASFL No: 247360.
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