It is a very big week for the economy, with the Reserve Bank’s board meeting over the next two days, and it appears it will announce an increase in interest rates tomorrow afternoon. That would be the third rate hike this year and comes as oil prices remain high.
Inflation was rising ahead of the Middle East conflict, and the spike in oil prices triggered a headline consumer price index of 4.6 per cent in the 12 months to the end of March. The all-important underlying rate was 3.3 per cent, above the central bank’s target range.
Most market economists expect a rate hike tomorrow as the RBA attempts to slow the economy and take the wind out of the inflation sails. Similarly, the bond market is pricing in a rate hike.
National average house prices for the month of April showed the
slowest pace of growth since January 2025
City
Annual growth rate (%)
Median value
Sydney
4.2
$1,292,157
Melbourne
2.0
$822,969
Brisbane
19.7
$1,116,180
Adelaide
12.2
$944,673
Perth
26.0
$1,039,949
Hobart
8.5
$744,296
Darwin
19.6
$619,351
Canberra
5.6
$898,242
Combined capitals
9.1
$1,031,838
Combined regionals
12.0
$765,769
National
9.8
$940,048
Source: Cotality
Fear & Greed Q+A today
“Right now, the troubling thing that the Reserve Bank board will be confronting is a real checkerboard of news on inflation. You would hike on inflation, but on the growth outlook and the risk for unemployment, you would pause. That’s where sensible people can have a really hard discussion, and the endpoint will be a really difficult decision to make, whatever they do.”
The residential auction market looks to be settling closer to a supply-demand equilibrium, with the national preliminary clearance rate over the weekend coming in at 60 per cent – the second week in a row it has paced at that level.
Almost one-in-four international flights leaving Australia were cancelled last month, as the war in the Middle East and sky-rocketing jet fuel prices forced carriers to rethink schedules.
Tesla generated more revenue from its home storage batteries and grid-scale energy systems than it did from electric vehicles in Australia last year, as overall profits from its local operations fell by 19 per cent.
Warren Buffet’s successor, Greg Abel, oversaw his first gathering of Berkshire Hathaway shareholders over the weekend, and his message was that investors need to be patient, and he will act decisively when opportunities arise.
The US will begin issuing passports featuring Donald Trump’s face, as the president continues to put his image and name on America’s institutions of state and national symbols.
Fear-o-meter
Diana Mousina, AMP Deputy Chief Economist, on equities
Solid economic data, enthusiasm around the AI‑driven growth outlook and strong earnings results pushed US equities higher … with the S&P 500 once again reaching a record high. The index rose more than 9% in April, rebounding sharply from a 5% decline in March and marking its strongest monthly performance since the Covid‑related sell‑off in 2020. This rally has occurred despite ongoing geopolitical tensions and no clear resolution to the US-Iran impasse.
In contrast, Australian equities were down by 0.7% [last] week, with a decline in consumer staples, healthcare, utilities and tech. Energy stocks were the notable outperformer. Overall, US equities continue to outperform other major markets this year.
Why are markets so blasé about the war? There is clearly an expectation that some form of resolution will emerge, particularly as missile attacks have eased in recent weeks. However, we think markets are underestimating the risks - especially in the oil market.
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