February 2021 Market SCOOP
With many of Australia’s states and territories now open to interstate travel (with the exception of WA), we are beginning to see key areas of the economy improve, which no-doubt is a relief for many. Key economic data shows that inflation continues to remain weak - at 0.90% for the December quarter. This is a key metric to watch, as higher inflation tends to result in higher interest rates and higher home loan rates.
Commsec recently released a report, measuring eight key indicators: economic growth; retail spending; equipment investment; unemployment; construction work; population growth; housing finance and dwelling commencements. For the fourth quarter in a row, Tasmania holds the mantle of the best performing economy. But notably there has been compression in the rankings with little to separate five of the other seven economies. The ACT remains in second spot, ahead of South Australia, in equal third spot with Victoria. Queensland is in fifth sport. NSW and Western Australia are just behind in joint sixth spot from the Northern Territory.
Source: Commsec – State of the State January 2021 Turning to home prices, national home prices rose by 3.0 per cent over the year to December. The strongest annual growth in home prices was in Tasmania (up 8.8 per cent); followed by Northern Territory (up 8.0 per cent); the ACT (up 7.5 per cent); South Australia (up 6.2 per cent); Queensland (up 5.1 per cent); NSW (up 3.8 per cent); and Western Australia (up 1.1 per cent). Home prices were lower than a year ago in Victoria (down 0.5 per cent).
With Australia remaining in a comfortable position, the same cannot be said for many other parts of the world. Early indicators show that Europe is again likely going backwards – risking a double dip recession. Although manufacturing in Germany remains strong - supported by the strong Chinese recovery, output in the UK fell at the quickest pace since May.The European central bank is considering additional stimulus measures as inflation remains stubbornly low and the rise in the euro currency against the US dollar puts the European recovery at risk. In contrast to weaker European data, US manufacturing activity surprisingly surged to its highest level in more than 13 years. US President Biden also approved 19 executive orders within the first three days of his presidency – 4 times more than Obama. Some of the contentious changes include re-joining the World Health Organisation and the Paris Climate Accord, mandating the use of masks on federal land along with incoming international travellers needing to quarantine. President Biden also axed the travel ban on several Muslim and African countries. Although the COVID19 vaccine provides hope for many, various investments risks remain and need to be well considered when formulating an investment plan. Feel free to contact us should you wish to discuss your personal situation.
Synergy Private Wealth