Australian markets demonstrate relative stability amid heightened global economic uncertainty, according to Janus Henderson fixed interest strategist Emma Lawson. The Bloomberg AusBond Composite 0+ Yr Index increased by 0.33 per cent in August, coinciding with the Reserve Bank of Australia’s (RBA) decision to lower the cash rate to 3.60 per cent. Meanwhile, three-month bank bills concluded at 3.57 per cent, and 10-year government bond yields saw a slight increase of 1 basis point, reaching 4.27 per cent. Janus Henderson is a global asset manager offering a range of financial products and services to individuals, advisors and institutions. Their aim is to help clients achieve their long-term financial goals.
Lawson noted that Australia’s economy is proving resilient despite a weaker global environment. Recent data indicates a monthly consumer price index of 2.8 per cent year-on-year and an unemployment rate of 4.2 per cent. Consumer and business confidence have both shown signs of improvement. The RBA is anticipated to implement a further 75 basis points in cuts, potentially bringing the rate down to 2.85 per cent by mid-2025. However, Lawson suggests the risks are oriented towards more substantial easing if growth decelerates.
Addressing the housing market, Lawson highlighted that structural undersupply continues to be a significant issue. The ratio of new population growth to housing approvals reached its peak at four in 2023 and remains elevated at 2.6. “This factor will continue to pressure housing prices as the shortfall is worked through,” she stated. While multi-dwelling approvals are showing signs of strengthening, single dwelling approvals remain weak.
Investor housing credit growth is surpassing owner-occupier demand, which Lawson attributes to affordability pressures and regulatory backing for higher-density housing. Capital city prices saw an increase of 0.8 per cent in August. “Even with lower mortgage rates, housing affordability may remain a headwind for cyclical demand,” Lawson concluded.
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