The RBA has thrown a lot of cash at the market. Was it too much?
I’m finding it hard to find a reason not to pile back into the markets right now.
I’m definitely talking about the property market (though there was never any reason to get out!) but I’m also talking about equity markets.
Everything is looking pretty bullish right now.
Remember, at the beginning of the month the RBA dropped rates to just 0.1%, and announced they were going to print $100bn and pump it into the economy.
It’s a massive display of firepower.
And it would be just what the economy needed… if the economy was actually struggling.
But it’s not. It’s now looking like, on most measures, the economy is kicking along pretty well.
Take the NAB business survey for example. On their headline measures, trading and profitability are already back where they were pre-Covid.
Employment is still considerably lower, but that’s ok. Employment typically lags business conditions, and bosses work their existing staff harder before employing new staff.
So I’d expect that to bounce back in due course.
We have also seen a rebound in both business and consumer confidence, again back to pre-Covid levels.
And even conditions in Victoria have rebounded much more quickly than anyone expected.
There’s still a little bit of ground to make up on NSW, but not all that much.
And in case you’re wondering if this is an isolated picture, it’s not. We’re getting a similar read from the spending data.
The CBA have started releasing a weekly spending tracker, which tracks money coming out of CBA accounts.
And what they’ve found is that while there has been a boom in online spending since Covid began, in-store spending is also mounting a comeback.
Look at that, would ya? Total spending now growing at almost 15% year on year.
That’s huge. That’s a boom time story.
It’s possible it’s partly due to a shift to credit cards over dirty, disease-ridden cash. That’s possible. But I doubt it would explain all that much.
As I’ve noted elsewhere, most Australian households have seen their incomes go up since Covid started.
And it seems that a good chunk of them just decided to take the cash and spend it.
And again, if you look at the state-by-state breakdown, the comeback in Victoria has been phenomenal.
Pow! Look at that.
Victorians are bingeing hard!
So look, put it all together, and it’s looking like an economy that has pretty much fully recovered, just as we have pretty much eliminated Covid from the country.
It’s definitely not looking like an economy that needs interest rates at 0.1%, and $100bn cash injection.
But that’s what we’re getting.
And so it’s off to the moon we go.