Investment markets were subdued in March as global political risks relating to a US/China free trade deal and Brexit remain unresolved. The All Ordinaries index gained by 0.1% to close the month at 6,261.7 points.
The Australian Dollar was also flat, with 1 Australian Dollar buying 70.93 US cents as at the end of the month. As expected, the Reserve Bank of Australia (RBA) board kept the official Cash Rate on hold at 1.50% per annum.
For the month of March, the United States Dow Jones index gained by 0.1%, the London FTSE gained by 2.9%, the Japan Nikkei 225 fell by 0.8% and the Hong Kong Hang Seng Index gained by 1.9%.
There was further media attention given throughout the month to the state of the property market in the Eastern States. With values in sharp decline, the concern is the impact this will have on the broader economy.
While there is clearly a risk that falling house prices can lead to a downturn in the economy, the “big hope” for the Australian Economy is infrastructure spending. The chart below shows forecast infrastructure spending to 2025.
Source: Perpetual & Cuffelinks
Given the potential growth in infrastructure spending (with a projected peak in 2022), this has the potential to offset any decline in economic activity relating to the housing market over the short-term. That said, it is always a risk to the economy when transitioning from one sector of an economy (i.e. housing) to another (i.e. infrastructure).
With the Federal Budget to be announced this Tuesday evening (earlier than usual given the pending Federal Election), I will be keenly observing what commitments are made to future infrastructure spending beyond 2022 to support the Australian economy into the future.
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This article is general information only and is not intended to be a recommendation. We strongly recommend you seek advice from your financial adviser as to whether this information is appropriate to your needs, financial situation and investment objectives.