Register For Our Mailing List

Register to receive our free weekly newsletter including editorials.

The great impasse

  •   VanEck
  •   6 April 2023
  •      
  •   

Highlights

Australia the sweetest spot 

  • We continue to expect the RBA to increase the cash rate by 25bps at today’s meeting, to 3.85%.  The labour market and inflation have slowed only modestly meaning additional tightening is still needed.
  • Australia will be the lucky country again – just. While Australia faces some significant risks, China’s policy shift away from COVID zero and the RBA getting a significant amount of tightening in before wages had a chance to take off both mean Australia could avoid a recession.
  • If China can pick up pace and Australia can skirt a property/credit implosion, the Australian dollar could do well, particularly against a sliding US dollar. An easing of China trade sanctions will be icing on the cake.
  • While the housing market and consumer sentiment have looked a little more stable of late, this is still the “phony war” as the impact of rising rates has yet to fully hit households, with more significant impacts likely to be felt from March onward.
  • The Australian consumer staples sector has outperformed its global counterparts by almost 3 per cent over the past quarter reflecting the resilience of the Aussie consumer in the face of 10 consecutive rate hikes.
  • When the RBA does pause rate increases we expect a broad rally. Consumer discretionary names like JB Hi-Fi should benefit as consumers have a bit more breathing room in their budgets.
  • We continue to think investors should focus on liquidity, focus on balance sheets and cash flow and avoid highly volatile and speculative assets. We continue to see support for gold.

Gold is being turbocharged

  • Gold has been playing beach ball under water held down by rising US real rates. But geopolitics, crypto uncertainty and financial fears are now turbo-charging it.
  • Geopolitics is a secular support for gold. The retreat of globalisation, the rise of aggressive blocs of nations and the weaponisation of banking and payment systems has seen a fracturing of the US dollar consensus. In turn, central bank gold purchases have been rising sharply.
  • Recent movements in yields have also been supportive of gold. In the previous three instances when the short end of the US curve fell from its peak, gold prices rose for a sustained period.
  • The market is ignoring the negative effect of sustained higher rates on the global financial system. Interest expense will become a significant problem as record levels of debt across the globe are impacted by higher rates. This increasing debt burden, combined with an economic slowdown and sticky, elevated inflation are supportive of gold prices in 2023 and longer term.

Emerging markets are thriving, not surviving

  • One of the bright spots on global markets over the past few weeks has been emerging markets bonds, particularly selected local-currency bonds, which is almost exhibiting signs that it’s a safe haven asset in the current market environment.
  • Emerging Markets generally have low debts and deficits, independent central banks solely focused on inflation, and benefit from China’s reopening and are well-supported commodity prices.
  • In a world running from unsafe finance to safe finance, EM banks are generally deposit funded, not loan-funded, and have high common equity-to-assets ratios.

Download the full paper

 


 

Leave a Comment:

banner

Most viewed in recent weeks

Australian house prices close in on world record

Sydney is set to become the world’s most expensive city for housing over the next 12 months, a new report shows. Our other major cities aren’t far behind unless there are major changes to improve housing affordability.

The case for the $3 million super tax

The Government's proposed tax has copped a lot of flack though I think it's a reasonable approach to improve the long-term sustainability of superannuation and the retirement income system. Here’s why.

7 examples of how the new super tax will be calculated

You've no doubt heard about Division 296. These case studies show what people at various levels above the $3 million threshold might need to pay the ATO, with examples ranging from under $500 to more than $35,000.

The revolt against Baby Boomer wealth

The $3m super tax could be put down to the Government needing money and the wealthy being easy targets. It’s deeper than that though and this looks at the factors behind the policy and why more taxes on the wealthy are coming.

Meg on SMSFs: Withdrawing assets ahead of the $3m super tax

The super tax has caused an almighty scuffle, but for SMSFs impacted by the proposed tax, a big question remains: what should they do now? Here are ideas for those wanting to withdraw money from their SMSF.

The super tax and the defined benefits scandal

Australia's superannuation inequities date back to poor decisions made by Parliament two decades ago. If super for the wealthy needs resetting, so too does the defined benefits schemes for our public servants.

Latest Updates

Planning

Will young Australians be better off than their parents?

For much of Australia’s history, each new generation has been better off than the last: better jobs and incomes as well as improved living standards. A new report assesses whether this time may be different.

Superannuation

The rubbery numbers behind super tax concessions

In selling the super tax, Labor has repeated Treasury claims of there being $50 billion in super tax concessions annually, mostly flowing to high-income earners. This figure is vastly overstated.

Investment strategies

A steady road to getting rich

The latest lists of Australia’s wealthiest individuals show that while overall wealth has continued to rise, gains by individuals haven't been uniform. Many might have been better off adopting a simpler investment strategy.

Economy

Would a corporate tax cut boost productivity in Australia?

As inflation eases, the Albanese government is switching its focus to lifting Australia’s sluggish productivity. Can corporate tax cuts reboot growth - or are we chasing a theory that doesn’t quite work here?

Are V-shaped market recoveries becoming more frequent?

April’s sharp rebound may feel familiar, but are V-shaped recoveries really more common in the post-COVID world? A look at market history suggests otherwise and hints that a common bias might be skewing perceptions.

Investment strategies

Asset allocation in a world of riskier developed markets

Old distinctions between developed and emerging market bonds no longer hold true. At a time where true diversification matters more than ever, this has big ramifications for the way that portfolios should be constructed.

Investment strategies

Top 5 investment reads

As the July school holiday break nears, here are some investment classics to put onto your reading list. The books offer lessons in investment strategy, financial disasters, and mergers and acquisitions.

Sponsors

Alliances

© 2025 Morningstar, Inc. All rights reserved.

Disclaimer
The data, research and opinions provided here are for information purposes; are not an offer to buy or sell a security; and are not warranted to be correct, complete or accurate. Morningstar, its affiliates, and third-party content providers are not responsible for any investment decisions, damages or losses resulting from, or related to, the data and analyses or their use. To the extent any content is general advice, it has been prepared for clients of Morningstar Australasia Pty Ltd (ABN: 95 090 665 544, AFSL: 240892), without reference to your financial objectives, situation or needs. For more information refer to our Financial Services Guide. You should consider the advice in light of these matters and if applicable, the relevant Product Disclosure Statement before making any decision to invest. Past performance does not necessarily indicate a financial product’s future performance. To obtain advice tailored to your situation, contact a professional financial adviser. Articles are current as at date of publication.
This website contains information and opinions provided by third parties. Inclusion of this information does not necessarily represent Morningstar’s positions, strategies or opinions and should not be considered an endorsement by Morningstar.