Both globally and within Australia, September was a busy month for political and economic activity. However, not all of this had an immediate impact on markets. In this video, Shane Oliver, Chief Economist and Head of Investment Strategy at AMP Capital, provides a wrap-up of the month’s events. He discusses the Fed’s decision to hold interest rates, the recent Greek election, Australia’s new Prime Minister and Australia’s mining downturn – in particular its impact on interest rates.
The Fed made the right decision
The Fed’s decision to leave interest rates on hold following their September meeting reflects a necessary balance between the improvement in the US economy – evident by the drop in the unemployment rate – and the risk that inflation will continue to remain too low, in part due to global uncertainties. Given the risks around the global economy, the Fed made the right decision to hold-off on commencing an interest rate rise.
Greece threat easing
The re-election of Greek Prime Minister Alex Tsipras and his Syriza party last month didn’t receive much response from financial markets. With a three-year bail-out deal agreed on by both the major political parties before the election took place, Greece isn’t presenting an economic threat at this time.
New PM boosts consumer confidence
With our fourth Prime Minister in a period of 28 months, Australia’s soft economy could be partly to blame for political uncertainty. Malcolm Turnbull’s appointment to the role of Prime Minister has so far improved confidence among Australian voters – his understanding of the economy and of the importance to get this right in order to maximise the welfare of ordinary Australians is a good sign. But time will tell.
Mining sector still turning down but other sectors fill the gap
There is currently a strong divergence in the Australian economy – the mining boom has finished but the housing market and the jobs market is stronger in our less resource-rich states. Although growth is running at 2% - a percentage point or so lower than it should be – home building, tourism, manufacturing, higher education and general services are all working hard to fill the mining gap.
Watch the video to hear Shane’s full commentary on these topics.
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