Shane Oliver
Chief Economist and Head of Investment Strategy

Sharemarkets and property prices have rebounded as we reach the midway point for 2016, and monetary easing means we start the second half of the year with record low interest rates. In this video, Shane Oliver explains why we can expect further rate cuts before the end of the year.


How did the first half of 2016 look for investors?

Sharemarkets reached a low point in February before recovering in the past few months. This turnaround is the result of declining worries about the Chinese currency and global growth, and the Federal Reserve’s (Fed) announcement that any further interest rate rises will be gradual and with consideration to global economic movements.

Low inflation has seen monetary easing across the globe. Australia in particular is now faced with very low interest rates as a result of easing by the Reserve Bank of Australia (RBA).

Despite a soft start to the year, property prices have rebounded in Sydney and Melbourne. The remainder of Australia remains soft, with prices falling in Perth and modest growth in the other capital cities.

Outlook for the remainder of the year

Seasonal weakness is expected throughout the middle of the year, particularly around the September quarter. The ‘Brexit’ issue – where the people of Britain will decide whether it will remain in the Eurozone – along with the impending Australian and US elections have the potential to stir volatility.

Growth in the global and Australian economies should underpin profits and an ongoing rising trend in sharemarkets – we will likely see further gains before the end of the year.

Expect another one or two interest rate cuts from the RBA before the end of the year due to the weak inflation outlook. Government bonds are likely to move sideways or rise slightly.

Property markets are likely to slow in Sydney and Melbourne over the remainder of the year, with the other capital cities (except for Perth) growing to the order of around 5%.

Shane Oliver

Dr Shane Oliver has extensive experience analysing economic and investment cycles and how current positioning affects the return potential for asset classes such as shares, bonds, property and infrastructure. Shane is a regular media commentator, providing economic forecasts and analysis of key variables and issues that affect all asset markets.

 

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