The key points are as follows:

• Global growth is likely to be in the process of bottoming ahead of a pick up next year. The risk of a Euro-zone meltdown is receding, more monetary easing is also likely to keep the US recovery going and at the same time Chinese growth should soon pick up a bit.
• While shares may see short term volatility the combination of a stabilising global growth outlook, cheap valuations and easy global monetary conditions point to further gains by year end and into next year.
• Meanwhile, Australian economic data released today showed a slight improvement in both consumer confidence and dwelling starts. However, the trend in both is soft.
• Consumer confidence rose 1.6% in September, but the level of 98.2 remains sub-par relative to longer term averages and is little different from when interest rates started to come down late last year.
• Dwelling starts rose 4.6% in the June quarter, but this followed a sharp fall in the March quarter and was driven by a rebound in volatile multi unit approvals. Housing starts continued to soften.

Our view remains that interest rates in Australia remain too high to drive a decent pick up in non-mining activity at a time when the mining boom is starting to lose momentum. As a result we continue to see the RBA resuming rate cuts in the months ahead. 

To read the full report, click here.

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