Latest news with #Koukoulas
Yahoo
04-04-2025
- Business
- Yahoo
Superannuation warning to Aussies amid $21 billion plunge: 'Chilling effect'
A superannuation warning has been issued by the Reserve Bank of Australia as pressure mounts for the central bank to cut interest rates to stem the impact of of Donald Trump's tariffs. The RBA dropped its financial stability outlook hours after the US president revealed the details of his Liberation Day tariffs. The board exercised caution in regard to global economic fallout when holding the cash rate at 4.10 per cent on Tuesday. Yahoo Finance contributor Stephen Koukoulas described the move as a "serious error of judgment", but said it could spur the board to make the "radical" choice to double the predicted 25 basis point cut in May. While that would be a win for millions of homeowners, there are fears about Australia's superannuation system in the medium term. 'Serious' Aussie mortgage 'error' exposed amid Trump's tariffs bombshell: 'Radical answer' Westpac responds to customer's fury after cash withdrawal debacle 'costs him $6,500': 'You've got my money' Commonwealth Bank confirms $50,000 move for first-home buyers: 'Game changer' The RBA noted in its stability outlook that Australia's superannuation system had a "high level" of resilience to national and international issues. But also forecast "extreme-but-plausible liquidity risks" if key stressors - like a fall in the Australian dollar or increased demand on early withdrawals under a Coalition plan for first-home buyers to tap their nest egg - hit at once. A problem could arise if superannuation funds "increase investment in foreign assets" and "unlisted assets, which are difficult to liquidate quickly".Koukoulas told Yahoo Finance that these unlisted assets could be things like big infrastructure projects, water programs, railways, and renewable energy. Investment in shares are fairly liquid assets. They can be sold off and money would be returned quickly in sudden economic downturns. However, unlisted assets aren't the same. "If you're putting $100 million into this really whiz-bang firm that looks to be doing well but there's a five-year time horizon, it's not going to be yielding any meaningful returns quickly," Koukoulas told Yahoo Finance. "If you need to liquidate that asset, who are you going to sell it to at a time when there's inevitably global market dislocation coming through?" Super funds may struggle to pay out if there is a sudden demand from first home buyers or workers reaching retirement age and cashing out, some in part to avoid market volatility. If they're overseas assets, then they will involve foreign exchange considerations when purchasing and selling due to currency fluctuations. Super funds like AustralianSuper and Australian Retirement Trust are moving in this direction because they've effectively exhausted the limits of what they can invest in the local share market. "That's been unfolding for several years now that our super funds are so big," Koukoulas said. "They're looking for alternatives because they've already bought shares in BHP and Commonwealth Bank." These issues could be coming to a head over the coming months. The US tariffs, which wiped out $21 billion in value on the benchmark ASX200 and $3.1 trillion on the S&P500 on Thursday, will be applied to dozens of countries in the coming days. That volatility could continue as it's uncertain how much impact this will have on Australia's share market and overseas markets. 'Ongoing uncertainty surrounding the imposition of tariffs and other trade restrictions between the United States and other major economies could have a chilling effect on business investment and household spending decisions, and pose substantial headwinds to the outlook for global economic activity,' the RBA said. 'There is also considerable uncertainty about the effects of possible fiscal, regulatory and other government policy changes on global growth and inflation.' The markets had pulled back on a priced in prediction of four rate cuts this year following the RBA's hold decision on Tuesday. But after Trump's announcement, the markets predict an 82 per cent change of the cash rate being cut to 3.85 per cent in May. That's up from a 70 per cent chance before the tariff plan hit. The expectation is three or four cuts could take the cash rate to 3.1 per cent this year. Koukoulas warned the RBA's decision to hold interest rates at its March-April meeting "will have implications for employment and business opportunities" in the future. He added that "the case for even more aggressive interest rate cuts is obvious". "If global economic conditions stall, which is increasingly likely, the negative blow-back will be significant," he said. "This will exacerbate the rise in unemployment which is already happening, it will crimp economic growth just when GDP was looking a little better while the impact on inflation is likely to be a wash, aside from some short-term spikes and falls."Sign in to access your portfolio
Yahoo
22-03-2025
- Business
- Yahoo
Shock figures raise prospect of rate cut
A steep decline in employment figures over the past month has raised prospects the Reserve Bank could cut rates as early as April, economists say. Employment fell by 53,000 in February off the back of a spike in older workers quitting the workforce – against expectations of 30,000 new jobs created, recent Australian Bureau of Statistics (ABS) figures reveal. Full-time employment fell by 35,700 in February and part-time jobs declined by 17,000. However, a fall in jobs can generally mean good news for future rate cuts, because inflation is lowered through reducing demand for staff, which leads to lower wages and in turn less pressure on prices. Overall, the unemployment rate held steady at 4.1 per cent, in line with market was due to less people wanting to work in February compared with January. Market Economic managing director Stephen Koukoulas said the surprising fall in the number of Australians working should be a concern for the RBA. 'Employment dropped a net 22,300 in the first two months of 2025, the weakest first two months of a calendar year since 1991,' Mr Koukoulas wrote on X (formerly Twitter). 'The RBA would be wise to cut to ensure things don't get too much weaker. An interest-rate cut is necessary.' Commonwealth Bank head of economics Gareth Aird said Thursday's jobs figures 'completely blindsided forecasters', with Australia's employment growth now looking more robust than extraordinary. 'We don't think the RBA will be swayed by today's labour market data at the April Board meeting. That is, we still expect the Board to leave the cash rate on hold and resume normalising the cash rate in May with a 25bp rate decrease,' he said. 'But at the margin it adds a little more weight to the ABS February monthly CPI indicator, due March 26.' Mr Aird said if inflation data due in March comes in below RBA 0.7 per cent quarterly forecast 'April 1 board meeting could shift to live.' KPMG chief economist Brendan Rynne said the large drop in employment could be a sign households are getting on top of their finances as more Aussies retired and the female participation rate dropped. 'It is possible that a combination of the stage 3 tax cuts, the February interest rate cut and some wages growth in partner incomes have done enough to ease household budgets and pull them back from looking for work,' Mr Rynne said. The RBA cut the cash rate for the first time since the covid pandemic in February dropping the cash rate from 4.35 to 4.1 per cent. The bank's new monetary policy board will meet on March 31 to April 1 but so far markets are predicting the next rate cut will come in May.
