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Weekly Economic Commentary

Weekly Economic Commentary

Categories: General, General

News that the sharp lift in coal prices has flowed through to a doubling of contract prices for Australian coking coal exports for the next quarter is clearly a boost for the Australian economy. While the contract prices are unlikely to remain at these levels long term, the short term lift to Australia’s GDP is by no means insignificant (estimated to be around 2% of nominal GDP). This may see an end to the four years of declining national income as a result of falling commodity prices.

Plus, it will further discount the need for the RBA to consider another rate cut which is reflected in the futures market that has a terminal (low) official cash rate of only 1.41% by mid next year (chart below, OIS = “Overnight Index Swap”), and then a higher cash rate out further.

Cash Rate Graph

Oh, and for those keeping an eye on the US Presidential election side-show; the final Trump/Clinton debate takes place in Las Vegas this Wednesday and is currently assigning Clinton an 86.2% change of winning versus 13.8% for Trump. Politics polls currently have a 48/42 probability of an election win in Clinton’s favour.

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Source: www.ruralbank.com.au

 

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