Daily Commentary BY THE CURVE TEAM –

New Year Same Uncertainty

1st July 2020

As we welcome in the new financial year the final data points for FY20-21 set up new challenges and the same uncertainty.

In what was a big final day of release for the financial year we heard from RBA deputy Governor Guy Debelle, got ABS payroll data and saw credit aggregates data from the RBA.

Debelle spoke before an Economics Society of Australia webinar on the RBA’s recent policy action and balance sheet. There weren’t many surprises in the speech which was more of a recap of recent action by the RBA. Debelle reaffirmed their positioned that they are confident monetary policy is supportive of the economy and they stand ready to act further if required. The RBA would likely increase the volumes of their government security purchases should the need for additional support materialise.

The payroll data showed a continuation of the steady improvement seen over recent weeks. The 1% rise for the week bring the aggregate level to 6.4% below the pre-covid position. The government would certainly be hoping that with the impending deadline for Jobkeeper and JobSeeker that these figures get as near as practical to the pre-covid position prior to September.

One of the key factors for the outlook over the next financial year for the economy and certainly for interest rate investors is the demand for consumer credit. RBA data out yesterday saw total outstanding credit reduce by 0.1% for the month of May. Whilst total housing credit rose slightly with owner occupied credit up 0.49% and investor credit down 0.25%, the total credit figures fell due to decline in both business and personal credit. It is certainly likely that the now $17 billion in superannuation fund that have been drawn under the early access scheme has seen many repay outstanding credit card or personal loan balances.

The only item on the domestic data calendar is building approval for May with another significant decline expected.

Matthew Dunshea

Client Relationship Manager