It was a positive month for investment markets in July, with the All-Ordinaries index increasing 3.0% for the month, and closing at 7,622.2 points. The Australian Dollar increased by 0.8% in July against the United States dollar, with 1 Australian Dollar currently buying 67.2 United States cents.
Global share markets were generally stronger in the month, with the United States Dow Jones Index gaining 3.3%, the London FTSE gaining 2.2%, and the Hong Kong Hang Seng Index gaining 6.1% for July. The Japan Nikkei 225 was the outlier falling by 0.1%.
The Reserve Bank of Australia (RBA) Board kept the official Cash Rate on hold at 4.10% per annum in July. The RBA Board meets again today, with hope from many borrowers of no further increases as the domestic inflation rate fell to 6.0% year-on-year to the end of June as shown below.
In further evidence that RBA rate increases are impacting consumers, household savings are at the lowest level seen in over a decade as shown below.
The above chart shows a ratio of the amount of household income saved to net disposable income and is current to the end of December 2022.
With several borrowers fixed rate mortgages maturing this calendar year (the so called “mortgage cliff” as noted in previous newsletters), it is expected that the savings ratio will continue to decline as more current data is released. Should this eventuate, this will be further evidence that the domestic economy cannot withstand further interest rate increases.
Notwithstanding the above, consensus from economists and financial markets are evenly split on the prospect of a further interest rate rise today. All will be revealed at 2PM.
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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.