The key points are as follows:

• The December half profit reporting season was far better than feared and big cost controls have helped lay the ground work for stronger profit growth ahead.
• December quarter GDP growth of 0.6% was right on expectations and is the third quarter in a row of growth around a sub trend 2.5% annualised pace. Given the mining slowdown and soft growth elsewhere in the economy, GDP growth is likely to remain around this subdued pace over the next six months. 
• While interest rates may need to fall a bit further, green shoots of recovery are starting to emerge and suggest we are at or near the low for rates and more importantly point to an improvement in economic and profit growth on a 12 month horizon.
• While the share market has moved up ahead of profits this is not particularly unusual and price to earnings multiples are just around their long run average. We continue to see further gains in Australian shares over the year ahead.

To read this edition of Oliver’s Insights, click here.

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