10 July 2019
Bob Cunneen, Senior Economist and Portfolio Specialist
Australia’s share market has delivered strong returns so far in 2019. The ASX 200 share price index (blue line) has risen by over 17% this year and is just 3% below the historic high set back in 2008. This strong surge in Australian shares comes from a combination of positives such as the Reserve Bank of Australia cutting interest rates, a lower Australian dollar as well as strong global share market performance this year.
Judging by this robust Australian share market performance, you could easily come to the view that all is well with the Australian economy. However, the NAB Business survey shows a more concerning assessment. Business confidence has been falling over the past year (red line). A myriad of negative factors such as Australia’s weak housing market, sluggish retail spending and tighter credit conditions appear to be weighing heavily on corporate confidence.
This sharp gulf between a hopeful Australian share market and a more cautious business sector is not sustainable. Something will have to give. Either the Australian share market may have a reality check soon and give up some of this year’s extraordinary gains, or the Australian business sector will respond more positively to the lower interest rates climate. Let’s all hope that the business sector is the one to now positively surprise on the upside.
Important information
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