Inflation spikes, rates set to rise; ASX falls for 7th day; Aldi profit tumbles

Inflation spikes, rates set to rise; ASX falls for 7th day; Aldi profit tumbles

News in brief

The S&P/ASX200 closed down for the 7^th session in a row yesterday, finishing off 0.3 per cent to 8687 points. It matches the worst run of down-days since June 2022, and while the falls haven’t been precipitous, the index is six per cent below its high back in February, just as Wall Street sets new highs.

 

Aldi’s profit in Australia tumbled 20 per cent last year as a renewed price war against its main rivals, Woolworths and Coles, escalates.

 

National childcare group G8 Education will close down 40 centres across the country, blaming cost challenges, falling birthrates, an increase in long day-care supply and a collapse in occupancy rates.

 

Pacific Equity Partners has launched a $754 million bid for outdoor advertising group, oOh!Media, at a price 65 per cent above where the company’s shares were trading.

 

For decades, OPEC has ruled oil markets. However, one of the world’s largest producers of Brent, the United Arab Emirates has said it will leave the oil cartel, just as the war in Iran challenges alliances and investment priorities among the world’s top oil producers.

Fear-o-meter

AMP’s deputy chief economist Diana Mousina on inflation

 

"The good news from [the ABS] release is that trimmed mean inflation came in slightly below the RBA’s February forecast of 0.9 per cent for the March quarter. However, looking ahead, trimmed mean inflation is expected to rise in annual terms in the June quarter, reaching around 3.8 per cent year‑on‑year…

 

"Compounding this concern, oil prices are rising again, with the Strait of Hormuz remaining effectively closed despite the so‑called “ceasefire” between the US and Iran. If oil prices remain above US$100 per barrel over coming months, inflation is likely to prove higher than we currently expect.

 

"While the RBA has no direct control over oil prices, higher energy costs matter because they have powerful second‑round effects across the economy. Virtually every industry is affected by transport costs, and oil and its by‑products are key inputs into manufacturing and agriculture.

 

"Importantly, Australia already had an inflation problem before the war began — although it appeared to be coming under control. In that context, the RBA’s only effective lever is to slow broader economic activity and dampen demand‑driven inflation pressures, helping to offset the flow‑on effects from higher energy costs.

 

We see the [RBA] Board raising the cash rate by another 25 basis points in May, taking it to 4.35 per cent - although, once again, this is likely to be a split decision."

Fear & Greed Q+A today

Belinda Dennett, CEO of Data Centres Australia, joined Fear & Greed at the Microsoft AI Tour to talk about Australia becoming a data centre hub, the billions of dollars flowing into the sector, and some of the myths and misconceptions around the tech infrastructure:

 

"What’s really interesting about data centre investment is that it actually underpins the energy transition. Just last week we saw one of the global tech companies making huge investments in renewable energy through power purchase agreements.

"Eight out of nine of the projects they’re funding include battery storage — that’s a game changer. Globally, about 45% of renewable projects are underwritten by data centres.

"So without data centres supporting the transition, governments would have to fund all of it, and that would fall back on taxpayers. That’s why we say data centres are actually a catalyst for the energy transition, not a problem for it."

Federal Treasurer Jim Chalmers has warned that inflation is set to rise further, after prices jumped by 4.6 per cent in the year ended March – the fastest pace in nearly three years. The spike in inflation is likely to convince the Reserve Bank board to lift interest rates when it meets next. The underlying rate of inflation, which excludes volatile items such as the oil spike, rose by 3.3 per cent, still well above the central bank’s preferred range of two to three per cent. The ABS numbers were not as bad as some economists forecast, but that’s unlikely to prevent a rate hike. All the chief economists of the big four banks are now tipping the third hike this year, following increases in February and March. Bond markets have priced in a 76 per cent chance of a rate hike.

Greed-o-meter

City	Median price $	Qtr %	Year %
Sydney	1,791,643	-0.04	6.6
Melbourne	1,082,728	-0.6	4.4
Brisbane	1,212,195	4.2	20.4
Adelaide	1,099,293	5.2	16.4
Canberra	1,083,769	1.4	9.7
Perth	1,178,522	5.7	24.6
Hobart	817,251	4.7	14
Darwin	734,710	8.4	19.7
Combined	1,301,306	1.8	11.2

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Sydney and Melbourne have recorded their first quarterly house price declines in years, according to Domain. Buyers are pulling back as rate hikes and affordability pressures bite.

Listen to today's episode 🎧 

Source: Domain Quarterly House Price Report