Investors enjoyed a more prosperous 2019 than 2018.
Residential property prices are on the rise again, Australian bonds have performed well and so have equities, which appear set to end 2019 not far off the record highs achieved in November. Without a crystal ball, there’s no way of knowing what 2020 will bring but here’s Trilogy’s 12 Christmas wishes for investors.
1. An amicable end to the US-China trade war
The squabble between the world’s two largest economies has been a negative backdrop to 2019. Each advance or setback in talks sends shivers through markets from currencies to commodities around the world, dampening investor and consumer confidence. Some experts warn the tensions are unresolvable, but let’s hope they’re wrong and 2020 brings an end to this impasse.
2. Sustained growth in property prices
After bottoming in June 2019, the residential property market has come roaring back, with November witnessing some of the largest monthly price increases in years. The recovery has been led by Melbourne and Sydney, however the trend seems broad-based and even Perth, where prices have been falling for over five years, turned positive again.
3. More stability in property markets
Earlier in 2019 home values appeared to be in freefall, but now they are tipped to hit new all-time highs in 2020. The speed of this recovery has surprised the Reserve Bank of Australia and the Australian Prudential Regulation Authority, which relaxed lending rules in June 2019. They must be hoping they have not helped spark another unsustainable appreciation in property prices.
4. Continued low interest rates
The RBA cut its official cash rate to a new record low of 0.75% in October, and as a result business borrowings and home mortgages have lower interest rates to service. There are no indications that rates will begin rising again in 2020, and indeed the RBA has indicated it is prepared to cut rates further if necessary.
5. But not negative rates
Several central banks around the world have already resorted to negative interest rates in a bid to boost consumer spending, borrowing and investment. But some experts warn they are having the opposite effect. Here’s hoping Australia is not forced to join the experiment next year, if only because such desperate measures would indicate the economic outlook had deteriorated rapidly.
6. A (faster) growing economy
Australia is headed for an incredible 30th consecutive year of uninterrupted economic expansion, but the latest Australian Bureau of Statistics revealed annual GDP growth of 1.7%, well short of that necessary to drive employment levels higher and lift wages. Higher levels of spending and investment in 2020 will be needed to remedy this.
7. An end to the drought and widespread bushfires
Farm GDP was 5.9% down for the year to September and has fallen in four of the past five quarters, but the full cost to Australia of the unusually dry conditions prevailing over large areas of the east of the country is much higher than that. Substantial rain would restore hope to drought-ravaged rural communities.
8. A turnaround in business investment
Former Treasury secretary Ken Henry says something is “desperately wrong” because business investment is currently almost as weak as it was during Australia’s last recession, in 1990. The Productivity Commission blames this for falling productivity levels. There are no magic wands to reawaken investors’ animal spirits, but Henry believes a shake-up of our antiquated tax system must be part of the solution.
9. Bipartisan approach to reforms
The Treasury agrees with Henry, saying “The tax system is holding Australia back”. However the same could be argued for many other aspects of our economy and even our political system. With Australians’ faith in politics at 50-year lows, let’s hope our political leaders can pleasantly surprise us by working together to begin effectively tackling these issues in the year ahead.
10. A coherent energy policy
Businesses and consumers need reliable, affordable electricity. At the same time as a nation we’re obligated to decarbonise our energy and other sectors to meet global obligations. Yet even as the challenges mount, our national energy policy has been in limbo since the Coalition dumped its National Energy Guarantee. Another opportunity for leadership from Canberra.
11. No more bank scandals
The final report of the banking royal commission was released in February. But the scandals continue to unfold, with Westpac most recently in the news for all the wrong reasons. Customers weary of wondering where they should be banking will be wishing for a whole year without any new allegations of gross misconduct in our financial sector.
12. Better relations with China
Our land abounds in nature’s goods, much of which we ship to China. Unfortunately, relations between Canberra and Beijing are somewhat strained at the moment, which Paul Keating blames on Australian ‘’hysteria” and Tony Abbott on Chinese “bullying”. Australian investors will sleep more easily if we can find a way to get on better with our biggest trading partner in 2020.
With the support of our investors, borrowers and clients, 2019 has been an exciting year of growth and achievement for the Trilogy team. In addition to these 12 Christmas wishes we hope you and your families have a safe and happy holiday season as we look forward to what 2020 might hold.
The information on this website contains general information and does not take into account your personal objectives, financial situation or needs. Trilogy is only licensed to provide general financial product advice on its own products and does not consider your objectives, financial situation or needs when providing any information or advice.