Josh Gilbert, Market Analyst at eToro, shares his three things to watch in Australia in the coming days.
RBA rate decision
Looking ahead to the Reserve Bank of Australia's (RBA) rate decision this Tuesday, a second rate cut is not on the cards for April. This will be disappointing to many but not unsurprising, with so many local and international factors stoking economic volatility. The RBA cut rates back in February, but has kept a hawkish stance and made it clear they’re in no rush to cut rates again.
The expectation for a May cut has grown following the inflation reading earlier this month, as both trimmed and headline inflation came in below forecasts. February’s Consumer Price Index (CPI) came in lower than expected at 2.4%, and although this does signal a continuing easing of inflation, there are other elements the RBA has to consider. It’s these other variables that suggest the next rate cut won’t come to fruition until May at the earliest.
Ongoing global market uncertainty, paired with last week’s Federal Budget and subsequent announcement of the upcoming Federal Election, are factors that must be monitored closely before the Reserve Bank can confidently deliver a cut.
The Federal Election date call for May 3 may throw a question mark on a rate cut in May, but markets still see a 70% chance of a cut. After this week’s call, which to be clear, looks set to see rates stay on hold, the focal point will shift to Q1 CPI data at the end of April, which we expect to show the continued trend of easing price pressures, giving the RBA the freedom to lower rates in May and beyond.
Retail sales
The ripples of the RBA’s long-awaited February rate cut have finally hit the edge of the pond, and consumer optimism is on its way back.
Since the start of the year, we have seen indicators that many retailers have continued to underperform, with the exception of stalwarts like JB Hi-Fi. That has put a dampener on overall industry optimism, even as month-on-month retail sales figures gradually began to thaw, albeit largely behind expectations.
Last week, however, fresh NAB data revealed that consumer confidence has rebounded to its highest level since March 2022. Across Melbourne, suburban retail strip vacancies have declined to their lowest level in seven years. More broadly, retail vacancy across Australia’s major Central Business Districts (CBDs) is now at its lowest level since 2021.
It’s expected we’ll see that boost in this week’s retail sales figures, which will cover the February period. While it may still be another quarter before we see individual company reports reflecting recovery, growth and prosperity, the perception on the ground is that main streets are filling back up and shoppers are less anxious about their back pocket.
AU elections
Local investors may be feeling some relief following last week’s Federal Budget, particularly those invested in the materials sector, with the government announcing A$750 million in support for the metals manufacturing sector. This follows US President Trump’s decision to raise tariffs by 25% on all aluminium and steel goods imports, including our own. The treasurer’s announcement is a good safeguard measure, but a drop in the pond relative to the industry’s export value.
Following the budget address, the treasurer downplayed the US’s impact on our GDP and inflation. Still, it is clear that tariffs and volatility from America are forecast to drag on our economic growth somewhat, and markets are struggling underneath turbulence from Trump’s tariff play. This, alongside a very short lead on the election trail, is likely to cause local uncertainty.
All eyes are now on the election trail. The ASX slipped in the wake of Albanese’s election date call, and markets are struggling underneath turbulence from Trump’s tariff play. A very short lead on the election trail will inevitably cause additional local uncertainty. Frankly, there’s not a lot for investors to get excited about just yet, but opposition leader Peter Dutton made it clear he intends to invest heavily in innovative industries while bringing back significant support for natural gas. Should we get more concrete details on both of those plans, it’s easy to see how the Coalition could easily court retail investor support.