Asia-Pacific: The Week Ahead (Mar 11-18)

By Steven Levine, Senior Market Analyst, Interactive Brokers


Australia’s Housing Market Shakes its Foundations

The week ahead in the Asia-Pacific region will be somewhat light on economic releases, however, several updates are due out of Australia, including business and consumer confidence, as well as housing data.

The fresh reports fall at the heels of the Reserve Bank of Australia’s decision Tuesday to leave its cash rate unchanged at 1.5%.

RBA governor Philip Lowe cited lingering uncertainties over global trade tensions and highlighted China’s efforts to ease its financial conditions, partly in response to its slowing economy.

On the domestic front, the RBA pointed out that while the Australian labor market remains “strong,’ other indicators suggest growth slowed over the second half of 2018.

(Click on image to enlarge)

The country’s growth outlook is being buttressed by rising business investment, higher levels of spending on public infrastructure and increased employment. However, uncertainties continue to include weak growth in household income and falling housing prices in some cities.

The latest reading of the Westpac-Melbourne Institute Index of House Price Expectations dropped 8.4% to 87.8, marking a new record low since May 2009, when the index had begun compiling.

Meanwhile, the RBA said inflation remains “low and stable.” The central bank expects underlying inflation to “pick up over the next couple of years, with the pick-up likely to be gradual and to take a little longer than earlier expected.”

Overall, the low level of interest rates is continuing to support the Australian economy.

Marc Chandler, the chief market strategist at Bannockburn Global Forex, noted that the RBA’s decision to leave rates unchanged was unsurprising. He said that despite the central bank’s “claims of neutrality, the market is gradually pricing in a greater chance of a cut in the second half.”  

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Disclosure: The author does not hold any positions in the financial instruments referenced in the materials provided.

The analysis in this material is provided for information only and is not ...

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