March 2024 Newsletter
March 2024 @ Longreach Private Wealth
Welcome to the first edition of Longreach Private Wealth’s 2024 Newsletters.
After a summer of quite extreme weather in many places around Australia, we can hopefully look forward to the cooler, calmer weather that Autumn brings.
While economic bright spots can be found in Australia right now, there are also some continuing challenges.
On the positive, inflation has remained at a two-year low giving some commentators confidence of a rate cut in the coming months. CPI was steady at 3.4% in the 12 months to January. In other good news, business capital investment rose in the December quarter to be 7.9% higher than it was 12 months before and average weekly earnings rose by 4.5% or $81 per week.
It has been a mixed report for retail, with a 1.1% increase in sales for January but that wasn’t enough to make up for the 2.1% loss in December. The Australian dollar remains in the doldrums, weakening below 65.2 US cents after reaching a high of 69.48 near the end of 2023.
Australian shares were up by just over 1% for the month after a shaky start thanks to worries over US interest rates and China. US stocks edged higher during February with the S&P 500 and the Dow Jones Industrial Average reaching record highs during the month. February was dominated by news of the massive profit report by artificial intelligence chipmaker Nvidia, which had a massive effect on markets across the world.
At any time, if you have any questions or concerns or if there are any specific matters you want to address, please contact us.
We also always welcome the opportunity to help or speak to your family, friends, or acquaintances should they be seeking financial advice.
Thank you for entrusting us with your financial advice needs, and we look forward to continuing our relationship and working together to help you achieve your financial objectives.
Peter, John, Sharon, Kirstin & Wendy
2023 Year in Review: defying predictions
Australia’s economy stubbornly defied predictions during 2023.
Some had expected an end to the Reserve Bank’s continued cash rate rises during the year. Instead, inflation has been a stubborn foe and we saw five rate rises, adding another 1.25%. But there was good news for property investors with an increase in prices in some cities.
On another positive note, superannuation funds bounced back after losses in 2022. SuperRatings reported that the median balanced option is expected to return 9.6% in 2023, after most funds produced negative returns the previous year.
*Year to September, ^September quarter = November
Sources: RBA, ABS, Westpac Melbourne Institute, Trading Economics
The big picture
Global economic forecasts for 2023 were also beset by a number of wild cards during the year. While many economists were predicting recession in the United States and Europe and a rebound in China, the year ended differently with no recession in the US, Europe struggling but doing better than expected and China still battling some headwinds.
October brought concerns of a wider Middle East conflict, the International Monetary Fund revising its outlooks for the region, saying that an escalation of the conflict could be far-reaching, affecting tourism, trade, and investment.
Inflation and interest rates
In Australia, economic growth slowed a little on 2022’s result but still delivered a better return than forecast. On the latest data available from the end of September, the economy grew by 2.1% although a larger-than-expected increase in the population is putting extra pressure on housing and prices, keeping inflation higher. It was the eighth quarter in a row of economic growth.
Inflation remains high but many believe we have seen the end of interest rate rises for 2024. The latest figures show the rate of inflation dropped from 4.9% in October to 4.3% in November.
New dwelling prices rose 5.5% in the 12 months to November while rents rose 7.1%. Electricity prices were up by 10.7% for the year and food and non-alcoholic beverages increased by 4.6%.
The Reserve Bank raised the cash rate five times in 2023 to finish the year at 4.35%.
Sharemarkets
Global sharemarkets ended 2023 on a more positive note. In the US, welcome news from the Federal Reserve of an end to rate hikes saw stocks and bonds soar in the final weeks of the year. During the year, the Dow Jones index increased by 13.7% and the Nasdaq by 43.4%. There was mixed news in Asian markets with a jump of 28.2% on the Nikkei 225 and 18.7% on India’s BSE Sensex but China’s Shanghai Compositive fell 3.7% and the Straits Times index of Singapore was down 0.3%.
Australia’s sharemarket may not have experienced the heady doubledigit returns of some global markets but it ended the year with a gain of almost 8%, marking its best performance since 2021.
Commodities
Despite big falls from the peaks of 2022, commodity prices remain high across the board.
Iron ore, Australia’s biggest export, rose more than 21% as the Chinese government continues to create strong demand by stimulating property and infrastructure development.
Oil prices saw some spikes during the year but steadied by December. However, the World Bank notes that conflict in the Middle East, on top of the disruptions caused by the war in Ukraine, could cause a major oil price shock, pushing global commodity markets into uncharted waters.
As the US dollar gathers strength and Australia’s high inflation figures persist, the Australian dollar is under pressure. It ended the year where it began after recovering from a slide in the second half of the year.
Property Market
While rising interest rates usually dampen property prices, by year’s end we saw a remarkable turnaround for some cities in another result that upended forecasts.
CoreLogic’s national Home Value Index rose 8.1% in 2023, up from the 4.9% drop in 2022 but not quite at the stellar 24.5% increase recorded in 2021.
It was a patchy performance across the country. House prices rose at more than 1% every month on average in Perth, Adelaide, and Brisbane in the second half of the year. While Melbourne values dropped in November and December, Sydney and Canberra prices barely moved, and Hobart and Darwin prices fell slightly.
Looking ahead
As floods and storms ravage the eastern states and bushfires break out in the west, another tumultuous Australian summer might be mirrored by a chaotic year for the economy both in Australia and overseas.
The RBA expects economic growth to remain subdued but resilient in 2024, largely supported by construction and infrastructure work. Meanwhile the rebound in international students and tourism is expected to contribute to robust growth in consumer spending. The RBA is also confident that inflation will continue to fall slightly throughout the year, but many predict at least one more cash rate increase during the year.
Worldwide, China’s spluttering economy and the outcome of the US presidential election may cause ripple effects across the globe, meanwhile markets will be nervously watching the conflicts in the Middle East and Ukraine as well as China’s threat to blockade Taiwan, for the potential to create broader economic challenges.
Whatever the year ahead brings, we are here for you. If you would like to discuss your investment strategy in the light of prevailing economic conditions, don’t hesitate to get in touch.
Riding the AI wave to make your life easier
During a period where technological developments have picked up speed, one innovation in particular wields a profound, broad-reaching impact on our lives.
That innovation is Artificial Intelligence (AI). Developments in computing power, the availability of data, and the rise of machine learning algorithms are driving AI’s incredible growth to transform the way we work, live, and deal with the world around us.
AI is not just changing the way we deal with the world, but also changing the world. It is anticipated that AI will boost the global economy by $15.7 trillion by 2030. That’s more than the value of China and India’s economies combined. AI will drive this growth by contributing to labour productivity increases (by up to 40%) due to new technologies supporting more efficient workplaces and the creation of a new virtual workforce capable of solving problems and self-learning. These changes have profound implications for labour markets, businesses, and economies.
Driving innovation
As anyone who has received personalised product recommendations, which have clearly been based on your browsing and purchase history, retail and ecommerce are the most obvious sectors benefitting from AI, but there are many other sectors that are utilising AI in unique ways.
AI is already assisting the manufacturing sector by optimising production and maintenance. AI can spot patterns and suggest preventative maintenance weeks or months before a failure occurs and provide efficiencies in the production process.
The healthcare industry is also starting to use AI to improve medical diagnosis by revealing issues that might go undetected by physicians and provide more personalised treatment based on patient data.
How you can use AI to make your life easier
While AI is being used in many ways by a wide range of industries, there are many ways to utilise AI In your personal and professional life that are worth exploring.
Improve productivity
If you need more hours in the day, AI task schedulers can help you organise and prioritise tasks, suggesting the best times to do certain tasks based on past productivity patterns. AI tools like Wordtune can also help if you’ve got reading to catch up on by providing a summary of lengthy documents or articles. Tools like Speechify can also transform text into audio, allowing you to ‘read’ on the go. Or to get your emails under control, AI can help you sort messages, remove irrelevant ones, and prioritise those that are important - even helping you with draft responses.
Elevate your efforts
Got a problem to solve or do you need some inspiration for a project? AI brainstorming tools like HyperWrite can provide fresh insights, suggest innovative solutions, and stimulate your creativity. Writing tools like WordTune can give the final polish to something you have drafted, or you can use AI tools to provide copy on a specific topic.
For a smoother, safer household
AI assistants such as Google Assistant, Siri and Alexa have been helping us for some time now and can now assist even more by acting as the hub of a smart home if you start to replace old appliances with new ‘smart’ devices you can control using voice commands.
The most popular device on the market is smart speakers to control what music is playing and volume levels, but more smart devices are coming onto the market all the time. Smart robot vacuum cleaners use algorithms to map your house and can be pre- programmed so you can come home to a clean house and even fridges are getting smarter, helping you with shopping lists and even placing online orders!
And for a safe smart home, security systems can leverage AI to detect unusual activity, send alerts to your phone and even contact authorities if needed.
Smart devices can also save money on power bills - adjusting lighting and temperature based on your daily routines and preferences.
There are many ways you can benefit from the current AI wave of innovation as it impacts so many industry sectors and areas of our working and personal lives. As it’s a wave that’s growing in momentum, it’s worth using some artificial intelligence to supplement yours!
Did you get Sick?
By John Cameron B.Ec.B.Comm, Dip.Bus, MBA (Exec)
I recently completed my second visit to India (my first visit was when I was 18-you do the maths). India fascinated me when I was 18, and it fascinates me even more now. It is like no other country. It has a history going back 5,000 years, and in around 1700, its economy accounted for one quarter of world GDP. Currently it is the world’s fifth largest economy (having recently passed the UK), and has the world’s largest population, at 1.4 billion people. In contrast to other countries such as China and Japan, India has one of the world’s best demographic profiles, with a big component of young people in the population. This augurs well for future economic growth as these people spend money setting themselves up for the future.
The country is hugely diverse, with many religions and ethnic groups (who all manage (mostly) to get along) as well as a wide range of differing environments, in terms of geography and climate.
As tourists, we found the people to be friendly and helpful, the food is wonderful, the service is excellent, the sights are captivating, and the history is rich and enthralling (and very different from anything I was taught at school). India is full of contrasts, and just as you feel you have got its measure – something will pop up to show how wrong you were. As one travel writer put it – “Whatever you believe to be true about India, probably is true. But the exact opposite is also probably true.”
Changes
As it is several decades since I first went to India, I was very interested to see the changes since then – and they are many.
The overall standard of living has obviously increased massively. When I first visited as an 18 year old, train stations were covered with beggars and homeless people. Now, the beggars and homeless people at train stations are few and far between, and the stations are much cleaner. This is but one example, but there has obviously been a big rise in the overall standard of living, and this was confirmed in discussions with some of our guides. One of our guides (in Mumbai) said that as a young girl, she wondered if the situation would ever improve. Happily, it has improved markedly over the last 20 years, she said. The first moves towards improving living standards began in the 1990’s, when the Indian Government started opening its economy to the world. It got a big boost in the last 20 years with the global “IT revolution” – in which India has been a key player.
The massive Indian railway system is now fully electrified, and passenger trains are much more comfortable than they used to be. However, the concept of “on time performance” is elastic.
There are substantial public transport systems in large cities such as Mumbai and Delhi. And, no, I did not see anybody hanging on to the outside of carriages.
There are modern freeways connecting major centres.
Modern, efficient airports have sprung up all over the country, serviced by modern, efficient airlines (who mostly do understand the concept of “on time performance”).
There are modern hotels equivalent to anything elsewhere, with very high standards of service.
If you get the feeling that I am something of a fan of India, you are correct. This is not meant to be a comprehensive analysis of modern India, just the observations of one traveller. I will certainly watch India with great interest as it meets the challenges ahead – and they are many. Not least, are political challenges - but they are no orphans in that regard.
Since returning, several people have asked if I have been away/have you been on holiday etc. When I replied that I had been to India, the response has sometimes been, “Did you get sick?”. The answer is, no – apart from a cold. This very question goes back to the “old India”, when travel to it often came with the risk of serious illness. Travelling to India today involves sensible precautions just like you should take when travelling anywhere. anywhere.
If anybody is looking for somewhere different to visit – you can certainly consider India.
Please Note:
The views expressed in this newsletter does not constitute advice in any way. If you would like advice on your current situation please contact us.