The past week has seen a further escalation of sanctions against Ukraine, this time targeting the energy sector. This has resulted in a further increase in oil prices and a decline in global stock markets. In the month of March, Australian shares were dragged down by the inability of financials to offset weakness in materials, information technology, and telecommunications stocks. In the past week, financials were the best performing sector, up 2.2 percent, led by Commonwealth Bank of Australia (CBA), which gained 5.1 percent. The Materials sector was the worst performer, down 3.4 percent, followed by Technology, which fell 1.8 percent. The Australian market outperformed the US market, with the S&P500 Index down 2.9 percent and the technology-heavy NASDAQ down another 4%. Bond yields increased sharply in response to concerns about inflation and monetary tightening. GDP is forecast to grow by around 4¼ per cent over 2022 and 2 per cent over 2023.

The impact of rising energy and food prices, as well as the possibility of supply chain disruptions, indicates that inflation has not yet peaked in many parts of the world. In Australia, underlying inflation has also increased in recent quarters and is expected to reach 314 percent in mid-2022, owing primarily to upstream cost pressures associated with strong demand in housing construction and durable goods, before easing as international and domestic supply chain constraints ease. Labor market tightening and the resulting increase in labour costs are expected to keep underlying inflation in the upper half of the target range of 2 to 3%. Headline inflation is expected to be higher than trimmed mean inflation in the near term (primarily due to higher fuel prices), but to fall back to underlying inflation after that.


Employment Outlook 2022

In labour news, Australian ANZ job advertisements increased by 8.4 percent, indicating continued strength in the labour market. By mid-2022, strong labour demand is expected to result in a lower unemployment rate and a declining rate of underemployment, as businesses increase the hours of existing employees to meet demand. The unemployment rate is expected to fall to 34% by 2022; this level of unemployment has not been seen in Australia in nearly half a century. The participation rate is expected to reach a record high in late 2022, owing to robust labour demand and longer-run structural drivers such as higher participation rates among females and older Australians.


Petrol Prices at Record High

As we are all painfully aware, the price of gasoline has increased significantly in recent weeks. Prices at Sydney’s bowsers are standard at $2.20 per litre. The ACCC said Russia’s invasion of Ukraine and the OPEC cartel’s refusal to increase crude oil production last month drove petrol prices to an eight-year high.

Oil prices have risen rapidly since US President Joe Biden banned Russian energy imports last week in an effort to punish Russia economically for its invasion of Ukraine. Russia produces approximately 7 million barrels per day, or roughly 7% of global supply. The reduced supply comes at an opportune time, as oil demand continues to grow as the global economy continues to open up as a result of the Omicron wave. Oil prices have risen as a result of increased demand and decreased supply.

Based on ABS surveys of household expenditure, CommSec calculates the average household using 35 litres of fuel per week is now spending nearly $250 per month on petrol, another record. Consumers in Australia have amassed record savings as a result of generous stimulus measures implemented during the pandemic, which will help cushion the short-term blow.


Housing Market Update

Rising mortgage rates, additional macroprudential intervention, affordability constraints, an increase in new housing supply, and an increase in property listings are expected to significantly cool the hot housing market in 2022, followed by a moderate downturn in 2023, economists and housing market analysts forecast.

The Corelogic national home value index increased by 0.6 percent in February, extending the housing market’s into the 17th consecutive month of increasing house value. While housing prices continue to rise in general, the rate of growth in the national index has slowed significantly since April of last year.

According to Corelogic, early indications suggest that housing markets will begin 2022 on a similar path to late last year, with house prices continuing to rise broadly but at a slower pace than in early 2021. However, if the 1.1% increase in January is sustained throughout the year, prices will increase by more than 13% annually.






The information in this website and the links has been prepared for general information purposes only by our research partners and does not take into account your personal objectives, financial situation or needs. It is not intended to provide commercial, financial, investment, accounting, tax, or legal advice. You should, before you make any decision regarding any information, strategies, or products mentioned on this website, consult a professional financial advisor to consider whether it is suitable and appropriate for you and your personal needs and circumstances.

Ronald Pratap

Principal Financial Planner at RP Wealth Management | Financial Planning l SMSF I Insurance l Property Advisory. Our purpose is to provide our clients with sound advice and direction to assist with their financial affairs and help them make the best choices in achieving what is important to them.

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