Economic Overview 2023

Key Highlights

• Significant monetary tightening since the early 1980s.
• Global economic performance varied across major economies.
• Current global growth is slightly below average.

Divergence Among Economies

• Europe: Tipping into recession.
• China: Soft economic performance but has shown signs of stabilization.
• United States: Outperformed expectations.

2024 Economic Expectations

• Anticipation of gradual economic slowdown.
• Uncertainty surrounding US economic performance due to various factors.
• Monetary policy impacts are delayed and variable.
  • Long-term fixed mortgage rates in the US dampen immediate effects.

Bond Market Insights

• Initial expectations of a US recession at the beginning of the year.
• Yields were expected to drop, but reassessment led to higher long yields.
• 10-Year Yield: Attempted to surpass 5% but has faced resistance.
• Future yield movements depend on US economic growth.
  • Mild recession may lead to falling yields.
  • Continued resilience may push yields above 5%.

China's Economic Outlook

• Political economy plays a significant role in forecasting.
• Recent government stimulus has stabilized growth but not fully revived housing market.
• Expectations for moderate growth improvement but no return to aggressive stimulus measures.

European Economic Performance

• Weakest among major economies, expected to remain stagnant.
• Monetary tightening will continue to exert pressure on consumer interest rates.

Australia's Economic Situation

• Positioned between Europe and the US in terms of resilience.
• Cracks are beginning to show in the economy; consumption is softening.
• Population growth has propped up GDP, but slowing growth may lead to recession (50-50 call).
• Inflation is believed to have peaked, but a lag is expected in its decline.

Inflation and Labor Market in Australia

• Tight labor market with rising wage growth.
• Inflation is projected to take time to reach central bank targets.

Conclusion and Future Outlook for 2024

• Uncertain year anticipated with global growth expected to slow early in the year.
• Expected easing of monetary policy by mid-year due to declining inflation.
• Stabilization of growth anticipated in the second half of 2024.
• Optimistic outlook for 2025 with better economic conditions.