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Weekly Economic Commentary

Weekly Economic Commentary

Categories: General, General

Inflation was a key focus last week and for a change, trade tensions eased as initial talks between the US and Europe were held, defusing immediate trade tensions however the stand-off between the US and China remains.

The latest June quarter CPI data out last week revealed CPI was still trading at or below the RBA’s target range (of 2% to 3%) and suggests there is little chance of the Australian economy breaking out of its low inflation trap and as such, no need for the RBA to move monetary policy any time soon. In fact some are now arguing that if the RBA’s sole objective was to meet its inflation target then interest rates should be cut. But as the RBA also places a lot of weight on maintaining financial stability, it doesn’t want to cut interest rates for fear of inducing households to take on more debt.

Last Saturday saw a series of (five) federal by-elections in Australia. With four of the five seats retained by the Labor party and the fifth retained by the Centre Alliance candidate, the results did not correlate with the government's improved standing in broad opinion polls over the past few months. The next Federal election needs to occur before the 18 May 2019 and the outcome of the by-elections makes the likelihood of the government calling an early Federal election this year extremely low.

Facebook made history last week and can now lay claim to the biggest stock-market wipe-out in American history. Its shares tumbled 19% last Thursday as sales (up 31% in the June quarter) and active user growth (up 11% year-on-year) was “not good enough” for the market. That translates to a $119 billion fall in market capitalisation, the largest ever loss of value in one day for a US-traded company. That compares to Intel's $91 billion loss on one day in September 2000, and Exxon Mobil's $53 billion one-day fall in October 2008.

Facebook share price, since 1 January 2018

Facebook share price, since 1 January 2018.

Of course, Mark Zuckerberg's personal wealth experienced its own epic plunge. His fortune tumbled by $15.9 billion, erasing his gains made this year and leaving him with a mere $70.6 billion. That leaves the poor guy now as the world's sixth-richest person, down three places on the Bloomberg Billionaires Index.

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Source: Rural Bank


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