18 Oct 2013
• Bill Shorten was confirmed as federal Labor leader and leader of the opposition outvoting Anthony Albanese. Tanya Plibersek was appointed deputy leader with the shadow ministry also selected. They have yet to be given their portfolios. Shorten has vowed that Labor will start again.
• Opposition leader Bill Shorten hit the ground running saying that Labor will stand firm on its support for a price on carbon setting up a pre-Christmas showdown with the Abbott government. Mr Abbott claimed that the September election was a referendum on the carbon price and that Labor appeared to have learned nothing.
• PM Abbott plans to present his carbon price repeal legislation before year end. It is expected to be rejected in December. If it is again rejected by a hostile senate in March or April (PM Abbott is pushing for a senate vote before year end as well), then another federal election is likely.
• It was a positive week for the Australian market buoyed by political agreement in Washington DC regarding the ending of the government shut-down and the raising/extending of the debt ceiling.
• The local market was also buoyed by company annual general meeting (AGM) season, which so far has been reasonably positive.
• Global markets also reacted positively following the agreement as many investors had been sitting on the sidelines waiting for the political deadlock to be broken.
• In stock news, resource stocks moved higher buoyed by Rio Tinto’s release of its 3rd quarter update which highlighted that iron ore shipments rose 4% on this time last year to a new quarterly record of 68 million tonnes.
• Telstra’s AGM was also received positively by the market with the stock moving 1.4% higher on the day. No dividend guidance was provided by the company.
• In contrast, Cochlear fell nearly 2% after the company downgraded its forecasts for the next financial year with expectations of net profit being flat on last year.
• The Aussie dollar remains elevated against the US dollar consolidating around the 94-95 cents mark – the result of the political instability in the US which makes Australia look more attractive to foreign investors.
• Total home loan values are at their highest level since September 2009, with the annual rate growing at over 16%. Investor home loan values are growing at the fastest pace since 2007, to the 2nd highest level on record.
• A combination of extremely low borrowing rates, plenty of cash still sitting on the sidelines, and banks again willing to lend up to 95% of a property’s value. Though, many banks have increased their interest rate rise affordability test to 2% above the current mortgage rates being offered.
• In contrast, owner-occupiers and first home owners are well behind investors where home loan value growth has been falling. The first home owner share of total loans is only just above the record all-time low as first home owners are priced out of both house and unit markets.
• Australian businesses continue to be more confident, a surge which has continued following the September elections. However, business conditions fell to their weakest level in 4 years…..the Coalition government has plenty of work to do to turn things around.
• The housing market in the US has also taken a breather as concerns arise regarding affordability of homes nationwide as well as the political instability.
• Chinese inflation grew more than expected in September rising above 3%, well above economists’ expectations. The Chinese inflation figure is used as somewhat of a gauge by global markets as to potential social unrest.
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