Australia does not look good

Good morning,

Overnight, we saw the US Business Index and Small Business Sentiment both sink yet lower. Already being at GFC levels. Mortgage firms in the US started laying off workers. Sound familiar?

US equities remained heavy, as interest rates look set to continue a rather relentless march higher. No matter how much economic pain this causes.?

Bizarrely, in Australia, we now have the Reserve Bank Governor doing media appearances to win over public opinion. With mis-direction on several questions in last night’s ABC interview he sought to paint the RBA as “understandably” wrong. Give me a break.

Will the Treasurer please SACK this guy immediately. How can he perform like that and keep his job. No one else in Australia can.

What was particularly worrying is that he has now latched onto the idea of chasing inflation with higher rates no matter what. Saying families will be OK, because only some will find they stretched too far when purchasing a home in the past couple of years. Yes, encouraged by his words. Governor Lowe, for low performance, even went to go so far as to say he never promised no rate hikes until 2024? Talk about re-write history for yourself?

This is just all round atrocious central banking and inappropriate behaviour by the Governor of our Reserve Bank.?

He should be dismissed instantly. If he had been replaced months ago, when I first suggested this needed to be done, we would already be seeing better management and conduct at the RBA.?

For markets, it is just the final nail in the coffin of any bull market believers. Rates will be going up even if they hurt the economy. Governor Lowe has always been a simple man and now he has a simplistic target of fighting inflation no matter what. This is after saying all last year that inflation was nothing to worry about. Lowe is set on yet another path to conduct terrible policy.?

Meanwhile, the Albanese government has demanded China remove all restrictions on trade.

Why? The reason they were put in place was Australia becoming the diplomatically most aggressive nation in the world against China.?

The Americans took full advantage and took over some of our export contracts.?

Now, suddenly, Australia still thinks it is all China’s fault and they should remove the restrictions. China is probably wondering where the apology is first. As I said at the time, Morrison was unravelling decades of previous Prime Ministers building a fabulous relationship with China. That backfired badly and it will take nearer a decade to repair the relationship.?

China will always listen to criticism behind closed doors. It was the Grand-standing of the previous PM, especially using his United Nations address over two years to attack China that has done the severe long term harm to the relationship. Including trade. To expect an immediate turnaround without a behind the closed doors apology, is naive.?

You may not agree, but it is what it is. Can Australia try some real diplomacy for a change instead of grandstanding for the domestic vote.

Overall, with a slowing global economy, risk of recession in Europe, USA and China simultaneously, the external sector does not look good. Domestically, Lowe will do everything he can to cause a recession. He still thinks the economy will continue to be strong? Will someone get him some new glasses?

The outlook for Australian equities and the Australian dollar remains bearish.?

Expect some volatility around the Fed rate hike which may only be 50 points, though 75 is possible. After a few days stock market consolidation, then expect the bear market in the US and Australia to resume.

Clifford Bennett