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This week has been quite a quiet data week for Australia and that's really led
us to focus very much on what we've seen for the RBA in terms of the Financial
Stability Review and also Governor Stevens speaking,
as well some data we've seen around the world. Starting off
the week we saw the Financial Stability Review come through and that really
pointed towards,
again a continuing our confidence in the stability of the financial
system
and an expectation that the economy will continue to strengthen going forward.
Those themes are really picked up in Stevens speech as well
this week, which really pointed towards confidence being a key factor
behind the growth we see at the moment an expectation that it will
strengthen going forward.
He did note that business confidence had improved over the past six
months also despite weakening a little bit recently
and also the consumer confidence had also improved
all through 2013 and it still remains at a decent level
although has deterioriated over the last couple of months.
Basically what the RBA is hoping to see is that confidence will come
through and
lead to further momentum in the economy particularly around the housing
investment
which has been a key strength of late and in additional
the continuation of this uptick we've seen in consumer spending as
well.
Obviously key to the outlook is also... non mining investment which
really needs to pick up. It's remaining very much...
very modest at the moment and is ... in no way offsetting the
decline we're starting to see in mining investment. Governor Stevens also
continued to talk about the benefit we're going to get from net exports
associated with the investment we've seen over the last couple years. That's
obviously a big positive for Australia but it's not really enough to actually
offset the decline in mining investment. This is really going to depend very much on
how confidence is place through
and also how the labour market performs as to whether we see this momentum
that we need to see
in the non mining investment and also in house consumption.
Looking across the world at the moment, what we've seen is that we
saw a somewhat softer data out of the US. It's basically not necessarily saying
that conditions are deteriorating, but rather they are remaining quite modest and with an
absence of strong growth.
Core durable orders really pointed towards a continuation of very modest
outcomes for business investment with businesses obviously quite focused on
...
their efficiency both in the terms of the capital they have
in use as well as their financial efficiency in terms of the way they
leverage themselves and use equity as well. You can probably think about it as basically
firms being much more focus on earnings
as opposed to growing their revenue base. We also had a few data points
in terms of the housing market.
Again this pointed to an absence in the momentum. Pending home sales is now
been falling for about...
or throughout the past year really; it's down about 10 percent for the year.
That's really pointing towards not only the winter weather having an effect
on the last couple months, but also the
significant rise we saw in interest rates there in the first half of 2013
coming through and really impacting activity.
Obviously the Federal Reserve will be really hoping to see that improve
and, I guess, the weather to become better and with that, the data
as well.
Next week will be quite key. We've got payroll coming out for the US
and that'll be a very key reports as it always is. Other than that, we'll have the ISMs as
well.
Again, they've been weaker recently and ... particularly for the
manufacturing side of things and so will be
really hoping to see the improvement there and more
reason to grow business investment going forward. Other than that around the
world, we've got the ECB meeting
next week. That'll be really key. We're starting to see the ECB meeting as
being quite live. There's a definite need to do more to try and get their
financial system working a lot better than it actually is at the moment.
This week we continue to see
household and business credit contract over the year
and that's really not something you can create
enduring robust up trend off so it really needs to see
particularly an improvement in that the business
sector and coming from the banking system there. In addition we've
got a number data points out for Australia -
we've got retail sales, dwelling approvals and also private credits talking about
what's happening in the household space; in addition we got international trade
and obviously we've got the RBA meeting. The RBA is going to remain on hold.
They're very comfortable with their current position with rates on hold for an extended
period and trying to provide stability there
and they really waiting to see what happens with that consumer
confidence and business confidence and also the labour market was going to really
key going forward.
So we'll come back next Friday and wrap all that up for you.