Economic & financial perspectives
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2013/14 financial year in review
A good year: Total returns on Australian shares (All Ordinaries Accumulation index) rose by 17.6 per cent in 2013/14 after lifting by 20.7 per cent in 2012/13 – the best back-to back returns in seven years.
- Other returns higher: Returns on dwellings are up 14.7 per cent while returns on government bonds have lifted by 5.4 per cent. A rare event – bonds, property and shares have all lifted over the past year. Financial markets: The Aussie dollar held in a US11 cent range over 2013/14, the smallest range in eight years. The cash rate stands at a 54-year low of 2.50 per cent with only one change in the year – the quarter percent rate cut in August 2013.
- Impressive economic credentials: The economy is recording ‘above-average’ growth; inflation is contained; interest rates are at 54-year lows; and the current account deficit is the best (lowest) in 34 years.
What does it all mean?
- Overall, it has been a positive year, despite a raft of challenges such as geopolitical events (Egypt, Tunisia, Libya, Ukraine and Iraq, to name a few), the Federal Election, the shutdown of the US Government and even weather events like the harsh winter experienced in the Northern Hemisphere.
- Returns on shares, residential property and bonds have all lifted over the past year while interest rates and the Aussie dollar have ended little-changed on a year ago.
- The economy has grown by 3.5 per cent over the year to March (latest data), above longer-term averages of around 3 per cent. It is expected that that economy grew by around 3 per cent for the full 2013/14 year and we expect growth of around 3.3 per cent next year. Inflation may ease from 2.7 per cent to 2.4 per cent over the coming financial year while the unemployment rate may hold reasonably steady just below 6 per cent.
- What this all means is that it has been a very good twelve months for our economy and investments. While people may fret about the Budget, if they took a big picture view they would realise that there is little to worry about.