The global economy has continued to expand despite the ongoing implementation of tight monetary policy by most major central banks. Since June, most major central banks have begun to lower their official interest rates as they seek to engineer ‘soft landings’ for their economies. In the IMF’s view, ‘the global battle against inflation has largely been won’, while there remains a need for ‘ambitious reforms that boost technology and innovation’
In the case of the US, the change in administration following the win in the recent election by President Donald Trump could see actions taken to boost economic activity, including further cuts in corporate tax, a boost to oil and gas drilling, further deregulation of the economy, and an attempt to reduce wasteful government spending.
The Australian economy entered a per capita recession last year and remains weak, with households under cost-of-living pressure. Discretionary spending has fallen but tight monetary policy is likely to remain in place for some time.
Despite recent drops in interest rates, the New Zealand economy is still facing some challenges. NZ entered its second recession in 18 months in the last quarter of 2023. High inflation has continued to be a significant factor during 2024, impacting consumer spending and construction, although the worst would now appear to be over. The continued easing of inflation pressures in the New Zealand economy has allowed the Reserve Bank of New Zealand to ramp up its pace of interest rate cuts.
Annual CPI inflation is back within its 1 to 3 per cent inflation target band, and indicators point to a further easing in broader inflation pressures. Business and consumer sentiment have shown improvement, and there has been a rebound in housing permits as interest rates continue to ease into 2025.
As a result of global improvements major share markets have been trending upwards for most of 2024, with US markets in ‘bull market’ territory (up over 20% in a year). However, most other global markets appear to be fairly priced, assuming that a global recession can be avoided.
