Economic Update December 2022

December 2022 Economic UpdateAre we headed for a soft landing?

Where is the economy heading? One clue can be found in the language used by the RBA Governor, Philip Lowe, who has begun to use the term “soft landing” more often. “The path to achieving the needed decline in inflation and achieving a soft landing for the economy remains a narrow one,” Lowe said in announcing the board’s December rate rise.

A soft landing is not guaranteed, he is arguing, but the RBA is now willing to canvas it as a possibility This soft landing is only an option if inflation can be tamed without making unemployment worse and/or without a recession and there is reason to hope for that.

So far, progress on inflation has not caused the unemployment rate to budge. Unemployment has stopped falling, but is yet to rise, despite being at rarely seen lows. So, will Australia fall into recession?

There is no sign of it yet, with GDP growing steadily. Australian economic growth remained strong throughout the September quarter, with the economy expanding by 0.6 per cent to notch up 5.9 per cent growth over the year.

Interest rates are expected to rise only slightly more. Payton Capital expects at most one more rate hike in 2023, a view shared by Commonwealth Bank economists. Elsewhere, markets are pricing in two more rate hikes by the second half of next year and expect interest rates to top out at just over 3.6 per cent.

Whichever outcome transpires, it means most of the work in controlling inflation is now done.

Disclaimer: The information contained in this document is of a general nature and does not take into consideration the investment objectives, financial circumstances or needs of any particular recipient – it contains general information only. The views expressed in this document are solely those of the author and are subject to change without notice.

Any financial projection and other statements of anticipated future performance that are included in this document are for illustrative purposes only and are based on assumptions that are subject to risks and uncertainties and may prove to be incomplete or inaccurate. Actual results achieved may vary from the projections and the variations may be material.

Before deciding to make an investment with Payton, you should carefully read all of the information in the relevant Fund Information Memorandum, and consult with your business adviser, financial planner, accountant or tax adviser. Reliance upon information in this document is at the sole discretion of the reader.

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About the author / Craig Schloeffel

Craig Schloeffel - Head of Investment /- Craig has more than 15 years’ experience working across banking, financial markets, private wealth, lending, and residential construction.

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