November 2019 Recap

November is here, beginning with the “race that stops a nation”, but not the Reserve Bank which meets on the same day. However, economists predict it will take a break from its recent run of interest rate cuts and keep the cash rate steady.

October began with the Reserve Bank cutting the official cash rate by 25 basis points to a record low of 0.75 per cent and ended with the US Federal Reserve cutting its federal funds target range by the same amount to 1.5-1.75 per cent. Slowing global growth and ongoing trade tensions were major concerns. The IMF downgraded its forecasts for global economic growth to 3 per cent this year and 3.4 per cent in 2020. Australia is tipped to grow 1.7 per cent and 2.3 per cent respectively. China’s economy is holding up well despite the trade war, with growth of 6 per cent in the year to September.

Global stocks had a positive month on signs of a breakthrough in trade negotiations between the US and China. Despite the cancellation of the November APEC summit in Chile where phase one of a trade deal was to be signed, the Trump Administration has signaled it is keen to press ahead.

In Australia, inflation rose 0.5 per cent in the September quarter lifting the annual rate from 1.6 per cent to 1.7 per cent. This is still short of the Reserve Bank’s target but may allow it to delay further rate cuts. Consumers remain cautious – the Westpac-Melbourne Institute consumer sentiment index fell to a 4-year low in October. Business confidence is also weak – the NAB business confidence index fell to a 6-year low of 0.3 points September. The Australian dollar firmed in October to US69c.