February with a positive month for investment markets, with the All Ordinaries index closing the month 1.5% higher at 5,761 points. The Australian Dollar increased 1.3% in the month, with 1 Australian Dollar currently buying 76.78 US cents. The Reserve Bank of Australia left the official Cash Rate on hold at 1.50% per annum.
Global markets were stronger across the board in February. The United States Dow Jones index gained 4.8%, the London FTSE gained 2.3%, the Japan Nikkei 225 gained 0.4% and the Hong Kong Hang Seng Index gained 1.6% for the month.
In economic news, business confidence (which is the ‘missing link’ for non-mining investment in growing Australia’s economy) is finally showing promising signs. The chart below shows the NAB Monthly Business Survey results and the annual change in non-mining investment on a historical basis.
While Australia’s mining downturn was expected after a remarkable boom, the surprise is how subdued non-mining investment has been over the last five years. ‘Non mining investment’ includes sectors like health care, retail and travel.
Even with the positive factors of solid population growth, low interest rates and a weaker Australian dollar, non-mining investment has struggled to sustain growth. Australia’s corporate sector has been cautious about investing (following the Global Financial Crisis), with doubts about the strength of our economy and therefore future demand for goods and services.
At last, there are hopeful indications that business confidence is changing. Business confidence has risen to the highest level in five years – a welcome sign that non-mining investment should contribute to growth in the Australian economy in coming years (and by parallel growth in the value of Australian shares).
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This article is general information only and is not intended to be a recommendation. We strongly recommend you seek advice from your financial adviser as to whether this information is appropriate to your needs, financial situation and investment objectives.