New Zealand’s Reserve Bank has taken a bold step, slashing rates by 50 basis points to 4.25% – its third cut in just four months. Meanwhile, the Reserve Bank of Australia holds firm at 4.35%, its highest rate in over a decade.
This stark policy divergence highlights contrasting global economic realities and raises a critical question: Is the RBA too cautious, prioritising restraint over relief?
New Zealand’s rationale is straightforward. After two consecutive quarters of negative GDP growth, the country is in a technical recession. Inflation has eased to within the central bank’s target, but weak economic activity demands decisive action. Governor Adrian Orr framed the cuts as essential for closing the “output gap” and jump-starting growth.
In contrast, Australia remains hesitant despite clear signs of household distress under the strain of high interest rates and soaring living costs. Inflation has cooled, to 2.1%, thanks in part to government subsidies on electricity and falling fuel costs.
However, the RBA’s preferred trimmed mean inflation remains elevated at 3.5%, pointing to persistent underlying pressures. Rising rents, stubbornly high food prices, and stagnant wage growth are squeezing household budgets, particularly for younger mortgage holders.
Adding to the complexity, Black Friday and Cyber Monday sales are expected to skew spending data. Australians are projected to spend $12.7 billion during the sales, but this isn’t a sign of economic resilience. Instead, it reflects financial strain, as consumers wait for discounts to afford essential purchases. As Greg Jericho from the Australia Institute aptly observes, “If we are not able to sustain spending unless there are sales, that is a sign the economy is pretty weak and households are struggling.”
By holding back, the RBA risks compounding the pain for Australian households already struggling under the weight of high rates and rising living costs. In stark contrast, New Zealand’s bold approach shows how decisive action can provide relief for households and mortgage holders, and stability for the retail sector in tough times.
So, the question remains: How long can the RBA afford to wait before relief becomes too little, too late?
What are the best and worst-performing sectors this week?
The best-performing sectors include Health Care, up over 3%, followed by Real Estate and Information Technology, both up over 2%. The worst-performers include Energy, down over 3%, followed by Financials and Materials, both down under 0.5%.
The best-performing stocks in the ASX 100 include Pro Medicus, up over 11%, followed by Lendlease, up over 6%, and Telix Pharmaceuticals, up over 5%.
The worst-performing stocks include Pilbara Minerals, down over 8%, followed by Paladin Energy, down over 5%, and Whitehaven Coal, down 4%.
What’s next for the Australian stock market?
This week, the All Ordinaries Index maintained its upward momentum, with buyers driving the index up over half a per cent to test the critical 8,700 level. From a technical perspective, the market is following a classic uptrend pattern, where robust buying is met with healthy selling. This trajectory suggests the index could climb to the 8,800–8,900 range by year-end. While heavy selling pressure seems unlikely before December concludes, it’s always wise to stay prepared for any shifts.
If sellers do emerge, it’s essential to remain calm, as strong selling confirmation typically unfolds gradually. The key is to let profits run and avoid cutting them short prematurely. Until sellers establish a clear presence, riding healthy pullbacks can enhance returns. Should selling occur next week, look for support around the 8,500 level.
On the sector front, it’s impressive that the index posted a positive return despite its three strongest sectors – Materials, Energy, and Financials – closing in the red. A standout performer was the real estate sector, buoyed by rising expectations of lower interest rates next year. Known for its stability and yield, real estate has attracted significant investor interest. Meanwhile, consumer discretionary stocks enjoyed a holiday boost, with early festive spending benefiting retailers.
For traders, the ongoing sector rotation presents valuable opportunities. Timing your investments strategically is key to maximising growth.
For instance, the tech sector currently shows strong potential for short-term gains, while a medium to long-term approach in sectors like Energy and Materials may help you unlock their full upside potential.
For now, good luck and good trading.
Disclaimer:While Wealth Within holds an Australian Financial Services License (AFSL:226347) the information featured in this program is general in nature and therefore should not be relied upon. Before making any investment decisions, you should consult a licensed professional who can advise whether your investment decisions are appropriate for you.
Dale Gillham is Chief Analyst at Wealth Within and international bestselling author of How to Beat the Managed Funds by 20%. He is also the author of Accelerate Your Wealth—It’s Your Money, Your Choice, which is available in bookstores and online at www.wealthwithin.com.au.
The material provided in this article is for information only and should not be treated as investment advice. Viewers are encouraged to conduct their own research and consult with a certified financial advisor before making any investment decisions. For full disclaimer information, please click here.
