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Market Update June 2017

  • The domestic share market remained flat in June, rising under half a %.
  • The RBA left the official cash rate on hold at 1.5% in June. There has been no change in the cash rate since August 2016.
  • The US Federal Reserve raised interest rates for the second time in 3 months, spurred by steady economic growth and job gains.
  • The Australian Federal Government released its 2017/18 Budget. Major policy initiatives include an increased focus on transport infrastructure, funded by higher debt levels. It also includes new revenue initiatives – namely a levy on the five largest banks, an increase in the Medicare levy and a levy on foreign workers to pay for focussed spending initiatives on education, healthcare, small businesses and housing affordability. The Budget deficit for 2017/18 is estimated at $A29.4bn (1.6% of GDP), down from the 2016/17 deficit of $A37.6bn (2.1% of GDP).
  • Australian capital city dwelling prices fell by 1.1% in May, with annual growth slowing to 8.3% –  down from 11.2% the previous month.
  • The Australian dollar was weaker. Falls in bulk commodity prices – particularly iron ore and coal, led to the falls, in addition to concerns over the pace of growth in Australia. This has led to the market now pricing in the chance of interest rate cuts in Australia.
  • Globally, developed equity markets recorded another positive month in May, despite heavy news flow and elevated geopolitical uncertainty. Global shares rose 1.8% in USD terms (+2.8% in AUD terms). On the positive side was the market friendly outcome of Emmanuel Macron winning the French Presidential election, and continued signs of global economic growth. On the negative were acts of terrorism in the UK and some negative political developments in the US, which could further delay Trump’s expansionary policy agenda.

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