NEWS
10 Jul 2026 - Hedge Clippings |10 July 2026
|
|
|
|
Hedge Clippings | 10 July 2026 Summary: Housing takes centre stage this week, with fresh ABS approvals data and a rapidly falling price picture landing days apart. Indian Prime Minister Narendra Modi's Melbourne visit delivered a uranium deal which has been stalled for a decade, while offshore the quick military fixes promised in both Iran and Ukraine keep dragging on. National values post their steepest monthly fall since 2022, and HSBC says an 8% correction is just the beginning Source: Cotality Home Value Index, via Mortgage Professional Australia, 7 July 2026 Cotality's Home Value Index fell 0.4% nationally in June, the steepest monthly decline since December 2022, with capital city values down 1.3% over the quarter. Sydney (-1.2% for the month, -3.2% for the quarter) and Melbourne (-1.0%, -2.6%) are leading the fall. Sydney's top quartile ($1.8M plus) has shed roughly $90,000 or 5% in three months, and auction clearance rates have sat below 50% for five consecutive weeks. Domain separately forecasts Sydney down 7% and Melbourne down 8% to June 2027, while Perth, Adelaide and Brisbane keep growing. No doubt there will be further differences on a more granular geographic and suburb basis. Hedge Clippings' own anecdotal evidence from a real estate agent contact operating in Sydney's Elizabeth Bay suggesting achieved prices are already running about 15% below three months ago, with properties taking noticeably longer to sell. HSBC's Paul Bloxham called the tax reform and the RBA's three 2026 hikes a combination that has "rapidly sapped investor demand," pointing to a peak to trough correction of up to 8%. The issue is that property, as most Australian's largest asset impact consumer confidence and the rest of the economy. CBA now expects GDP growth to slow to 1.5% by year end. Economist Belinda Allen notes the oil shock hit was milder than feared, but a deterioration in the housing market is offsetting that relief. Source: ABS Building Approvals, released 3 July 2026. Total approvals: 17,019 (+5.5% YoY) Total dwellings approved fell 1.1% in May to 17,019, per ABS data released 3 July, but the composition tells the real story. ABS head of construction statistics Daniel Rossi attributed the fall entirely to a 10.4% drop in private dwellings excluding houses, which had jumped 4.0% in April. May's Budget's tax changes will not have not fed through to this data yet, since the CGT and negative gearing reforms only bite from mid-2027 and the SMSF LRBA ban from August. This is still largely a rate and confidence story, not a tax reform one. The stakes are asymmetric across tenure types. Nationally 66% of households own their home (35% with a mortgage, 31% outright) and 31% rent, per ABS and AIHW data. In Greater Sydney ownership drops to 59% (32% mortgaged, 27% outright) and renting rises to 35%. For the roughly one third of households still paying off a loan, this cycle delivers a rare double hit: elevated repayments and declining home equity at the same time, a combination that weighs directly on consumer confidence since housing remains most Australians' largest asset. Falling prices help Albo's aspirational first home buyers get a foot on the ladder, but they do not help the roughly 4 million households already on it who are watching equity erode while repayments stay elevated. That asymmetry is the real political and economic tension of this cycle, and no single data release resolves it. A decade long stalemate ends: Australia will sell uranium to India Indian Prime Minister Narendra Modi's third visit to Australia, his first stop after Indonesia on a three-nation tour, produced a nuclear cooperation agreement allowing Australian uranium exports to India for "exclusively peaceful purposes," ending a stalemate that persisted despite a 2014 cooperation pact. Albanese framed it as diversifying Australian trade beyond China, still the nation's top partner. Modi linked it to India's target of 100 gigawatts of nuclear capacity by 2047. The two leaders also agreed to deepen defence, critical minerals and space cooperation, including a tracking terminal on the Cocos Keeling Islands, and Modi pushed for an early conclusion to the proposed Comprehensive Economic Cooperation Agreement. This is a genuine long term positive for the Australian uranium and critical minerals sector, even though the commercial ramp up will take years, not months. However, let's not go into the logic of Australia, with 28% of the world's known uranium resources being happy to export it, but not prepared to use it domestically as a reliable long term power source, unless of course it is on a submarine. Two quick fixes that still are not fixed Trump's promised swift resolution in Iran, lunched on 28th of February, has stretched to four and a half months with no final treaty signed despite June's interim memorandum - but in fact with an renewed increase in hostilities. The parallel in Putin's Ukraine short term military exercise launched in 2022 with expectations of a rapid outcome, has instead run more than four years, with Russian forces now facing genuine attrition pressure. For markets, both situations underscore the same lesson: geopolitical resolutions tend to be announced faster than they are actually delivered, and oil and risk asset pricing should build in that lag rather than front run the headline. Next week: Australia's economic calendar delivers the data that will shape the August RBA call The RBA's next meeting is not until August 10-11 and is shaping as being critical for Australia's mortgage holders, as well as the RBA's own reputation. Prior to that the board will have the benefit of June's CPI number (due 29th July). With household equity under pressure from falling prices and mortgage holders squeezed on both sides, the case for diversified exposure beyond direct residential property remains strong. FundMonitors.com tracks 1,075 managed in Australia, helping advisers and HNW investors identify genuine alternatives as capital looks beyond the family home. News | Insights 4 ASX stocks we like despite the macro uncertainty | Glenmore Asset Management Netflix: Navigating deals, AI and growth | Magellan Investment Partners June 2026 Performance News Bennelong Australian Equities Fund |
|
|
If you'd like to receive Hedge Clippings direct to your inbox each Friday |
3 Jul 2026 - Hedge Clippings | 03 July 2026
|
|
|
|
Hedge Clippings | 03 July 2026
Let's look at the RBA Minutes first: The RBA's minutes from its 15-16 June meeting, released this week, confirmed the board held at 4.35% but kept the door open to further tightening, citing "excess demand and widespread inflationary pressures". Persistently weak productivity was flagged as a standing concern; unit labour costs remain above their inflation-targeting-period average despite wages growth in line with expectations, since output per hour isn't keeping pace. The board also linked flat equity prices partly to limited local AI-boom participation. CBA, ANZ and NAB all read the tone as hawkish but were split on the implications: CBA sees a hold through 2026, but with upside risk; ANZ is flagging an August rise if Q2 CPI surprises on the high side; and NAB reads it as confirmation the cash rate has peaked. Which one is on the money will depend on the June CPI due on 29th July, and PPI due 2 days later. But with the RBA not due to meet until 10-11 August, two weeks before the July CPI due on August 26th, there's going to be some crystal ball gazing around the board table. Complicating things will be the slide in the oil price thanks to the US-Iran de-escalation (assuming it holds), but offset by the reintroduction of the other half of the fuel excise levy, and lingering supply-side inflation still filtering through the system. Back to the ASX FY25-26 Close While the Australian equity market as a whole was lacklustre at best, particularly when judged against the S&P500 or Dow Jones, there was an extreme divergence between the sectors and companies that drove average returns, and those that dragged them down. A 48% materials rally carrying an entire index to a mid-single-digit total return (inclusive of dividends) says as much about concentration risk as it does about the benefit of diversification. Strip out rare earths and iron ore, and FY25-26 looks considerably flatter, and argues loudest for active management and offshore diversification vs. passive index investing. Source: IG Australia, ASX 200 FY close report The ASX 200 closed the financial year up 6.3% including dividends. Materials led at +48.2% on a rare earths and lithium re-rating, but even within the sector there were standouts: Mineral Resources (+186.9%), Lynas Rare Earths (+115.2%), Iluka Resources (+93.1%), plus Rio Tinto (+63.0%) and BHP (+62.4%) all leading the charge. While accepting averages can be misleading, stock selection, manager and fund selection, are vital to beating the index. While individual stock prices are known, fund performance for June 2026 is still pending. However in the 12 months to the end of May, just over 50% of equity funds on AFM's database outperformed the ASX200. Choice of the right sector, and fund, or funds, is obviously key. The top 10 over the past 12 months to May have returned between 75% and 126%, a list not unsurprisingly dominated by Resource Strategies such as Terra Capital, Argonaut and Paragon. By comparison, investing in a passive ASX200 Index strategy would force the investor to accept the good, the bad, and everything in between for a return of just under 7%. Finally, US Non-Farm Payrolls June's US jobs report delivered the softest headline in four months: payrolls up just 57,000 versus 115,000 expected, with April and May revised down a combined 74,000. Leisure and hospitality shed 61,000 roles on weak seasonal hiring. Notably, the month Goldman Sachs had modelled a 40,000 World Cup hiring boost that didn't materialise. Unemployment fell to a 12-month low of 4.2%, driven by a 720,000 plunge in the labour force rather than stronger hiring, pulling participation to 61.5%, its lowest since March 2021. Fed Chair Warsh's 17 June comment that labour data was "moving in a good direction" now reads as cover for an extended hold, with June CPI (14 July) the next catalyst. A falling unemployment rate built on a shrinking labour force is a weaker signal than the headline suggests. It buys Warsh time but doesn't resolve the tension between inflation and a cooling jobs market, worth watching alongside the RBA's own next move. Donald will want to focus on the US birthday celebrations this weekend, rather than the job numbers. News | Insights 10k Words | Equitable Investors Netflix: Navigating deals, AI and growth | Magellan Investment Partners May 2026 Performance News Bennelong Emerging Companies Fund |
|
|
If you'd like to receive Hedge Clippings direct to your inbox each Friday |
26 Jun 2026 - Hedge Clippings |26 June 2026
|
|
|
|
Hedge Clippings | 26 June 2026 Central banks are trying to sound calm. Markets are trying to sound confident. Neither looks entirely convincing. RBA | Waiting is not relief The Reserve Bank left the cash rate unchanged at 4.35%, but nobody should have confused that with comfort. After a year of policy reversals, first down, and then back up, the Board is now in the only other position available: waiting. That is not the same as relief. More a case of being stuck between a rock and a hard place. The latest inflation data gave both sides of the argument (and politics) something to cling to. Annualised headline CPI fell to 4.0% in May, helped by fuel-price effects, which was quickly treated in some corners as evidence that pressure is easing. The more important number, however, was the trimmed mean, which rose to 3.6% and reached its highest level since September 2024. That is the measure the RBA watches most closely, and as the chart above shows, it is not moving in the right direction. The difficulty the RBA has at this point in the cycle - apart from inflation remaining above their 2-3% trimmed mean target - is that they can see more volatility to pricing ahead. In July the fuel excise respite is due to halve, and at some stage will be removed altogether. While hostilities in the Middle East have abated (for now) it is going to take some time for the aftermath of the war, and its effects on supply driven inflation, to work through the system. The only certainty seems to be uncertainty. The labour market adds to the ambiguity. May employment rose by 40,300, which looks solid at first glance. But 35,200 of those jobs were part-time, while total hours worked fell. Unemployment eased to 4.4% from April's 4.5%, but this is not a labour market roaring back to life. It is a labour market holding headcount while reducing hours. That matters. It gives the RBA no clean reason to cut, and no urgent reason to hike. Instead, it keeps the Board exactly where it has been: staring at the next inflation print and hoping the economy does not force its hand. However, according to Renny Ellis from Arculus Funds Management, the market is only pricing in around 8 bps of tightening over the next 12 months, which he believes is under-pricing the medium-term risk of a "higher for longer" environment, which in his view is leading to a further rate rise in Q4 this year. Ellis also sees the risk of "a credible path to a second 25bp increase in 2027" as being possible. You can read his Market Commentary via this link. Property | The policy squeeze arrives before the policy changes The housing market is already showing strain. The combined capitals' preliminary auction clearance rate fell to 47.4%, the lowest weekly reading since April 2020. That is not a market looking through rate hikes. It is a market absorbing them. Sydney and Melbourne remain the key pressure points. Affordability is stretched, borrowing capacity has been hit, and consumer confidence has not been helped by the Budget's changes to negative gearing and capital gains tax. National home values were flat in May, while Sydney values are already below their November 2025 peak. The important point is that the tax changes have not yet landed. The CGT discount reform and negative gearing restrictions are not due to apply until July 2027, while the SMSF residential LRBA ban is expected around August 2026. The current weakness is therefore a combination of rate-driven, combined with investors reacting to uncertainty and fear of the tax reforms that will bite later. If consumer confidence deteriorates further, the property market could shift from a source of household wealth comfort to a source of household anxiety very quickly. Chalmers can argue about the technicalities of the property market being in a correction or not, but the reality for homeowners with a high LVR, or selling their house into a softening market are feeling the reality pinch. The bottom line This was a week of misleading headlines and uncomfortable details. Headline inflation fell, but underlying inflation rose. Jobs grew, but mostly part-time. GDP expanded, but only because data-centre investment did the heavy lifting. Property softened before the major tax reforms have even begun to bite. For investors, the lesson is familiar. Volatility does not just reveal market direction. It reveals process. It shows which managers are relying on beta, which are managing risk, and which have a framework strong enough to survive when the story changes. That is where FundMonitors matters. Weeks like this are exactly why manager research, peer comparison and performance analysis are worth doing properly. News | Insights Is the Consensus on Equities the Riskiest Trade in the Room? | East Coast Capital Management Market Commentary | Glenmore Asset Management May 2026 Performance News Seed Funds Management Financial Income Fund DAFM Digital Income Fund (Digital Income Class) |
|
|
If you'd like to receive Hedge Clippings direct to your inbox each Friday |
19 Jun 2026 - Hedge Clippings |19 June 2026
|
|
|
|
Hedge Clippings | 19 June 2026
News | Insights Expert Analysis of the RBA's June 16 Rate Decision Pressure at the pump | Magellan Investment Partners Federal Budget 2026-27: Winners, Losers and Opportunities for the Mining Sector | Australian Secure Capital Fund May 2026 Performance News Bennelong Long Short Equity Fund |
|
|
If you'd like to receive Hedge Clippings direct to your inbox each Friday |
12 Jun 2026 - Hedge Clippings |12 June 2026
|
|
|||
|
Hedge Clippings | 05 June 2026
News | Insights Shock absorption: managing the impact of the Middle East conflict on listed infrastructure | Magellan Investment Partners Property Update | Australian Secure Capital Fund May 2026 Performance News Quay Global Real Estate Fund (Unhedged) |
|||
|
If you'd like to receive Hedge Clippings direct to your inbox each Friday |
5 Jun 2026 - Hedge Clippings |05 June 2026
|
|
|
|
Hedge Clippings | 05 June 2026
The ABS released the March quarter 2026 National Accounts on Wednesday, and the result was a notable slowdown. Australian GDP expanded by just 0.3% on a quarterly basis in Q1 2026, against the 0.8% rise in the prior quarter, with the country's GDP growing just 2.5% year-on-year, both figures missing expectations. The internals told a revealing story: the biggest impact in the quarter was investment in data centres. Westpac estimates that this investment, including spillover effects, drove all the growth this quarter and around 0.8 percentage points of GDP growth in year-ended terms. In other words, strip out the data boom, and the underlying economy effectively flatlined. ICT investment surged from around $2 to $8 billion per quarter as a result of datacentres, accounting for an estimated 85% of growth capital expenditure over the last year, and almost all in Q1 2026. This reveals that the uplift in investment is almost wholly reliant on the data boom, with negligible investment growth in other industries. The economy was clearly slowing even before the Middle East conflict, and we've yet to know how long Trump's short military excursion, now into its third month, is going to last. Adding to the problem is that three interest rate hikes are starting to impact the housing market, which is now subject to further negativity thanks to being side swiped by the changes to negative gearing and CGT contained in the budget. The implication for the RBA's next move is interesting to say the least. Going into their June meeting, the economy is weaker than the RBA had assumed just a month ago, and Q2 could be worse. The Middle East conflict's full impact flows through from April onwards. Adding to this is the April jobs data, showing unemployment rising to 4.5% for April. The bottom line is that the economy is in a genuine squeeze, whether Chalmers or Albanese want to admit it or not. Inflation remains well above target and fuel-driven second-round effects are still working through, but growth is slowing, the labour market is softening, and the trade account has only partially recovered. The RBA faces a classic stagflationary dilemma, albeit a mild one at this stage. Meanwhile, the potential for an acceleration in the decline in property prices further damaging consumer confidence could tip the balance, and the economy, over. Whether the RBA will about-turn again, stay on hold, or, as Westpac are predicting, increase to 4.6% will remain to be seen, but with the next meeting just 10 days away, we won't have to wait too long. News | Insights
May 2026 Performance News |
|
|
If you'd like to receive Hedge Clippings direct to your inbox each Friday |
29 May 2026 - Hedge Clippings |29 May 2026
|
|
|
|
Hedge Clippings | 29 May 2026
News | Insights
AI needs more than chips: Why power and grid buildout matter | Magellan Investment Partners 10k Words | Equitable Investors April 2026 Performance News Equitable Investors Dragonfly Fund |
|
|
If you'd like to receive Hedge Clippings direct to your inbox each Friday |
22 May 2026 - Hedge Clippings |22 May 2026
|
|
|
|
Hedge Clippings | 22 May 2026 The 2026 Budget may come to be remembered less for its promised "fairness" than for the investment shock it has unleashed. Labor's changes to negative gearing and capital gains tax are being sold as a rebalance in favour of younger Australians. The political risk for Albanese and Chalmers is that they want to make it look like a targeted hit on the very wealthy, and older, asset rich, boomers. In reality, it is a broader attack on investment, property ownership and household balance sheets across a much wider demographic. For the property market, the early signs are not encouraging. Macquarie has reportedly stopped factoring negative gearing into some serviceability calculations, and Westpac has told brokers that some investor's loan pre-approvals will need reassessment. Once banks begin changing lending assumptions, policy theory quickly becomes market reality. The danger is not simply that investor demand weakens. It is that prices fall into an already fragile housing market. Morgan Stanley has reportedly warned of a 5-10% national house-price correction, with some analysts pointing to sharper risks in Sydney and Melbourne. That may sound like good news for first-home buyers. But falling prices are not costless. Recent buyers with high loan-to-value ratios are most exposed. The RBA has previously warned that negative equity makes borrowers and lenders more vulnerable, because a stressed borrower may be unable to repay the loan even by selling the property. The housing market is not the share market, and home loans do not operate like margin loans. But the feedback loop can still be brutal: weaker sentiment, tighter credit, fewer buyers, forced sales, lower prices, and then even tighter credit. What makes the current environment particularly dangerous is that the pressure points are no longer confined to one part of the economy. The Budget has not only shaken confidence in residential property investment. It has also fundamentally altered the tax landscape for equities, private investment and small business. At the very moment the government should arguably be encouraging investment and risk-taking, it has instead introduced a level of policy uncertainty that is causing both investors and lenders to reassess their appetite for risk. Meanwhile, inflation is proving far more stubborn than Canberra anticipated. To be fair to the government, a large part of the latest inflation shock is external. The RBA now expects headline inflation to peak at 4.8% in mid-2026, with underlying inflation remaining above the top of its target band until at least mid-2027. Consumer sentiment has already deteriorated sharply. The latest Westpac-Melbourne Institute survey reportedly fell 12.5% in April to levels not seen since the pandemic, while NAB business confidence suffered one of its steepest monthly falls in decades. And now the labour market is beginning to crack. Australia's unemployment rate rose to 4.5% in April - the highest level since November 2021 - after employment unexpectedly fell by almost 19,000 jobs. Economists are increasingly describing the labour market as "softening", with hiring intentions weakening under the combined weight of higher borrowing costs, weaker consumer demand and growing uncertainty. The result is a deeply uncomfortable combination: slowing growth, weakening confidence, and persistent inflation. Which brings us to the question nobody in Canberra wants to answer or us to ask: How close are we to recession? The margin for error is narrowing rapidly. The RBA itself has acknowledged that each successive rate rise increases recession risk. Under its more adverse scenarios, unemployment could rise above 5% and economic growth could slow to levels consistent with recession. At a time when confidence was already fragile, Chalmers chose to target the very areas most sensitive to confidence and leverage - housing, investment and small business - which drive the economy. The government may have hoped voters would see "fairness" - odd from a government that broke explicit pre-election promises. And this is where the Budget may prove both economically damaging for all, and for the government, politically catastrophic. For the past year Albanese has appeared untouchable. Today, the parallels with Bill Shorten's franking credits debacle prior to the 2019 election are becoming harder to ignore. News | Insights Market Commentary | Glenmore Asset Management China's Luxury Reset: What we're seeing on the ground and why it matters | Insync Fund Managers April 2026 Performance News Bennelong Concentrated Australian Equities Fund |
|
|
If you'd like to receive Hedge Clippings direct to your inbox each Friday |
15 May 2026 - Hedge Clippings |15 May 2026
|
|
|
|
Hedge Clippings | 15 May 2026 Last week, Hedge Clippings focused on the RBA's decision to raise rates, and the concerns raised by Nick Chaplin from Seed Funds Management and Renny Ellis from Arculus Funds Management that the Bank may have moved too soon when cutting rates last year, and now, thanks to inflation and energy prices, they're heaping further stress on households by returning them to their previous levels. Now we have the Budget. There is plenty in it for tax advisers, accountants and political commentators, but that is not AFM's lane. For managed fund investors, the issue is not tax detail, but the assumptions underneath the Budget, and the general thrust of the government, which is to target those with assets, or income, to find extra revenue. Our real concern is the emphasis and increased reliance on personal income tax as the major source of government revenue. Currently, this accounts for around 48-50% of total government revenue, but the AFR estimates it will rise to 54.5% by FY29-30. And you can forget the Treasurer's handout of $250 to each wage earner; this doesn't kick in until FY 2027-8, by which time the 68 cents per day will have been fully eroded by a combination of inflation and/or bracket creep. Thanks, Jim! Budgets are full of forecasts. Markets are full of people discovering which forecasts were wrong. Treasury expects headline inflation to reach 5.0% through the year to the June quarter 2026, with most of the increase attributed to higher fuel prices. It then expects inflation to decline to 2.5% by the June quarter 2027, helped by an assumed fall in global oil prices from mid-2026. Growth is forecast to slow from 2.25% in 2025-26 to 1.75% in 2026-27, before recovering to 2.25% in 2027-28. That is the soft-landing version: inflation eases, growth slows but does not break, unemployment rises gradually, and households absorb more pressure. It may prove right. It may also prove optimistic. The Budget acknowledges the outlook is highly uncertain, particularly around the Middle East conflict, supply chain disruption, and persistently high inflation. For managed fund investors, the question is not whether Treasury's forecasts are right or wrong. The better question is whether portfolios are being built as though those forecasts are guaranteed. That is where fund selection matters. If rates stay higher for longer, long-duration growth assets, listed property, infrastructure and parts of fixed income remain exposed to valuation pressure. If growth slows more sharply than expected, credit risk becomes more important, particularly in lower-rated or less liquid strategies. If inflation remains sticky, cash and floating-rate income may continue to look attractive, but investors still need to understand what risk is being taken to generate yield. Private credit is a useful example. It has become popular for good reason: investors want income, floating-rate exposure, and lower correlation to listed equities. But ASIC has identified poor private credit practices as one of its 2026 enforcement priorities, and has flagged increased retail exposure to private credit markets as a key issue. However, not all private credit is the same, depending on the way the fund is managed, spread of risk, and the underlying asset type in the fund. The Budget also points to more scrutiny of managed investment schemes, including ASIC's use of data and consultation on new data collection powers. That is no bad thing. In a tougher market, investors need more than a good headline return. They need to understand liquidity, leverage, valuation policies, concentration, volatility, drawdowns and how a fund may behave if the assumptions do not hold. The Budget's real message for investors is not hidden in the tax act which now exceeds 14,000 pages. It is in the forecasts. If inflation falls, oil prices ease, and growth holds up, the path is manageable. If not, the next twelve months may test which funds are resilient and which were priced for a forecast that was too neat. News | Insights
Prediction Markets: The next big disruption in investing? | Magellan Investment Partners April 2026 Performance News Seed Funds Management Financial Income Fund Insync Global Capital Aware Fund |
|
|
If you'd like to receive Hedge Clippings direct to your inbox each Friday |
8 May 2026 - Hedge Clippings | 08 May 2026
|
|
|
|
Hedge Clippings | 08 May 2026
This week saw the RBA meet most market observers' expectations by increasing rates by 0.25% - the second such move in a row, taking them back up to their previous post-COVID peak, and eradicating the three rate cuts they made last year. Hedge Clippings checked in with our regular contributors, Nick Chaplin from Seed Funds Management, and Renny Ellis from Arculus Funds Management, to get their respective views on the wisdom - or otherwise - of the Bank's decision. Both were broadly united in the view that the RBA's latest 0.25% rate rise to 4.35% may have been widely anticipated, but was poorly timed, and raised more questions than it answered. Nick Chaplin argued the move effectively reverses last year's rate cuts, taking the cash rate back to where it was before the RBA began easing. His central concern was the distinction between temporary inflation pressures and persistent inflation. With the trimmed mean holding at 3.3%, he questioned whether the RBA was reacting too heavily to energy-driven price pressures and their knock-on effects through logistics and household costs. While he accepted the Bank is right to be focused on inflation, he was skeptical of its approach, particularly the continued reliance on incremental 0.25% increases. If the RBA believes inflation risks are still rising, Nick suggested it may need to be clearer about where rates are heading, with the possibility that the cash rate could move as high as 4.85% before year-end. Renny Ellis was more direct, describing the energy shock as transitory and arguing the RBA should have looked through it, at least until the June meeting. His concern is not that inflation should be ignored, but that the Bank has acted before the full economic impact of the previous two rate increases has flowed through. Renny also warned that the decision was made ahead of a Federal Budget due next week that may include higher taxes, housing-related measures and household handouts, all of which could materially alter the economic outlook. Both Nick and Renny highlighted the risk that policy is now being tightened into a fragile environment. Ellis was particularly concerned about the potential for diesel rationing, arguing that it would almost certainly push Australia into recession. He drew a sharp contrast with 2020, when both the RBA and the Federal Government acted aggressively to avoid recession, noting that Australia's high household debt levels make a downturn especially dangerous. A key point from Renny was that the usual transmission mechanisms for monetary policy look less effective in the current environment. With the Australian dollar already strong, he questioned how higher rates would help beyond depressing house prices and household spending. Nick added that a stronger dollar could itself make it harder for the economy to avoid recession, particularly given Australia's past reliance on currency weakness and resource exports to cushion downturns. Both agreed that further rate increases may still become necessary later in the year, particularly if wages growth, the Fair Work Commission decision, fiscal policy and household spending keep demand elevated. However, both also argued that this was not the right moment to move. Their central criticism was not that inflation is irrelevant, but that the RBA has acted in a period of unusually poor visibility, with energy markets, the Budget and household stress all still unfolding. So as Renny questions in the video below, that leaves the potential that we are headed not for the "recession we had to have" but for the "recession we can't afford"? The outcome or length of a one-page, paper-thin, so-called truce in the Middle East could tip the balance. News | Insights
Manager Insights | Altor Capital Stock Story: Ampol | Airlie Funds Management Property Update | Australian Secure Capital Fund April 2026 Performance News Bennelong Australian Equities Fund 4D Global Infrastructure Fund (Unhedged) Quay Global Real Estate Fund (Unhedged) Active ETF (ASX:QGRU) |
|
|
If you'd like to receive Hedge Clippings direct to your inbox each Friday |
