Economics

Fear of an impending recession in the US has been hashed out for more than 18 months now, says Francis Gannon. The reasons are myriad, but not enough people are talking about what shape a recovery would take and how investors should position themselves.

The crippling doom loop between the banks and the real economy we saw in 2008 is unlikely to feature in the coming recession, says Ruffer’s Jamie Dannhauser, who is more concerned about a violent liquidation in financial markets.

While analysts see a negotiated deal as the most likely outcome, a compromise is still not guaranteed. The bigger concern, they say, stems from ballooning government debt loads across developed markets in the wake of pandemic spending.

The federal government plans to use part of the $4.2 billion projected budget surplus to provide cost-of-living relief for Australian households and small businesses. It’s also moving forward with controversial plans to change tax concessions for the superannuation industry.

The March quarter’s Selected Living Cost Indexes – which include mortgage costs, giving a fuller view of inflation’s real impact than the Consumer Price Index – show employee households and mortgage holders both saw record increases in their cost of living. And with rate hikes continuing to flow through the economy, more pain is on the horizon.

Economists attributed the rebound partly to the market’s expectations that interest rates had peaked. But the other key driver – the drastic supply/demand imbalance – means higher prices, especially for rents, may be further complicating the central bank’s task.

Australia’s states and territories are all still enjoying strong economic performance despite tumultuous conditions, but strong labour and housing data has propelled Tasmania to reclaim the top spot from Queensland in CommSec’s “State of the States” report for Q4 2022.

With the Reserve Bank of Australia opting for a surprise 11th rate hike, Ruffer’s Duncan MacInnes looks at the impossible choice central banks around the world are facing: let inflation gather steam, or act and risk a financial system calamity.

The average annual interest rate on banks’ one- and three- year term deposits has risen to 3.2 per cent from 0.25 per cent over the past year. With markets expecting the official cash rate to peak soon, savers looking to lock in attractive rates will find the best deals with smaller, newer banks, analysts say.

The 2023 EY Global Wealth Management Research Report showed 37 per cent of Australian investors think managing their wealth has become more complex in the past two years, with nearly half reporting they are looking for more financial advice across investment services.

The meltdown of Silicon Valley Bank is “an early step” towards a more rational market environment, according to Howard Marks, but new problems might arise from bank exposure to commercial real estate.

While small and medium enterprises remained resilient in March, concerns about rising input costs and the growing chances of recession have businesses toning down their hiring plans.