- The RBA continued their tightening cycle with another 50 basis point hike in August.
- There is now a delicate balance between addressing inflation and ensuring the economy is not adversely effects. This is now the core objective of the RBA.
- Moving forward, the RBA will have more latitude in balancing their objectives.
- Market liquidity has increased due to seasonal and dynamic changes.
- Term deposit and NCD rates have been volatile as reference rates bounce around and inflation expectations are revised.
- The yield curve has flattened, as longer dated rates fall.
- Investors should look at the weighted average return of their portfolio to improve their performance in a rising interest rate environment.
- The current yield curve is very accommodating for longer investments and allows investors to maximise their returns, whilst still mitigating interest rate risk.
The Australian Economy
- Consumer confidence is down as the pinch of inflation and tighter monetary policy conditions kick in.
- Business conditions and confidence has increased for the first time in a couple of months reporting an increase in profitability, and labour costs. They are in a better position than ever to pass on costs to the consumer.
Inflation is still present in the Australian economy yet might not be as embedded as feared.
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