It can be said that the global macro conditions are impacting the sentiments of the global market players and with worries in the mind of the investors regarding the global economic slowdown, the Australian economy can also get negatively impacted. It would not be wrong to say that the market players are already worried about the Australian economy because of the worries about the trade war escalation as well as fall in the housing prices. In the present scenario, the market players are worried that if the trade battle between the US and China does not settle down on the permanent basis, it could severely impact the global economy and the impacts would also be felt upon Australian economy. Also, according to the Reserve Bank of Australia or RBA, the housing prices have been witnessing the negative impact. The fall in the housing prices could also impact the broader banking sector. The banking sector has been witnessing other challenges as well.
The primary reason which has been impacting the housing prices might be the situation of the credit supply in the Australian economy. The tighter conditions impact the borrowing capacity of the borrower which further leads to the lower housing demand. Also, the regulatory measures have been negatively impacting the borrowing capability of the investors. The investors have been getting lesser help from the banks because these institutions have made the tighter leading to lesser options for the investors. Another factor which has been impacting the housing prices is the increased levels in regard to housing supply. Thus, it can be said that increased supply and lower demand have substantially weighed over the housing prices in Australia.
Therefore, the recent decision of the Reserve Bank of Australia to keep the rates unchanged was a reasonable one, and the market players were also expecting the same decision from the central bank. In the present scenario, the Australian economy can be said to be in the position where the macro variables could significantly impact the broader Australian economy. Still, there is a possibility that the trade battle between the US and China could escalate and thus, might hamper global growth. Also, as per the Reserve Bank of Australia, the interest rates at the current levels would be beneficial for the broader economy. The market participants were expecting that the meeting between the US and China would bring some relaxation to the global concerns or worries. However, at first, the markets reacted positively. Later on, the market trackers became more concerned about the outcome after the 90 days. The positive outcome would bring back the lost confidence among the investors and the situation about the global economy might improve. The United States and China have been imposing tariffs on each other which have already impacted the sentiments of the investors to a great extent. Also, the fears of the trade battle have impacted the financial markets as well. Thus, the permanent end to the trade war is very much needed by the market observers.
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