July 2022 – Insights
Welcome to the start of a new financial year. With winter in full swing, it’s a great time to rug up by the fire, take stock of the year that was and make plans for the future.
June was a big month in an eventful year for the local and global economy, with inflation and interest rates continuing to dominate. The US Federal Reserve lifted official rates by 0.75% to a target range of 1.50-1.75% to combat surging inflation of 8.6% in the year to May, stoking fears of a US recession.
Australia faces similar but less acute challenges. With inflation sitting at 5.1%, the Reserve Bank lifted the cash rate by 0.5% to 1.35% in July and Governor Philip Lowe hinted at more to come in August. The Australian economy is still growing relatively strongly at an annual rate of 3.3%. Retail trade rose 10.4% in the year to May on the back of low unemployment and high household savings. Household wealth (or net worth) rose to a record high of $574,807 in the year to March, but since then there has been a global sell-off in shares, a slowdown in the Australian housing market and cost of living pressures are mounting. The ANZ-Roy Morgan consumer confidence reading remains weak at 84.7 points (100 is neutral).
Australia’s national average petrol price rose to 211.9c a litre in June, the second highest on record, on the back of a surge in global oil prices. Brent Crude rose almost 45% over the past year as the war in Ukraine disrupts supply. Despite a late bounce in shares, the ASX200 fell 9.6% in the year to June, while US shares were down more than 12%. The Aussie dollar lost ground over the financial year to finish below US69c.
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