Sunset Strip | Aussie Afternoon Institutional Market Wrap

Aussie market recovered back towards the top of the recent 6 week trading band high with better oil price and retail bargain hunting. Turnover was just above $3.8b. Today’s low volume retail push shows the lack of conviction in the market to push to 6000 without a rate cut. Consumers are likely to further cut spending with rising unemployment (i.e. above 7%), rising costs, high level of debt and asset bubble worries. The lack of any employment initiatives will drive up risk for all consumer related domestic sectors. We are likely to see savings growth outstrip spending growth for the near future. The commodity boom to manufacturing burst over the past year has left Australia with asset bubbles that can’t be sustained without employment and wages growth. Capex plans show that there are no plans in corporates or government to absorb the substantially negative unemployment outlook. The three ways Mexican stand-off between consumers, corporate and government needs to be broken to drive growth in the medium to long term.