ETF Trends
ETF Trends

The Australian economy and exchange traded funds (ETFs) have been battered on all sides, but government policies may assuage the bruises.

Rising Home Demand. The combination of Australian benchmark interest rate of 4.25%, a six-year low, and increased government grants to first-time home buyers is likely to increase demand for housing this year, reports Jacob Greber for Bloomberg.

Expansionary Policy. The monetary policy is slated as “expansionary” in a response to low business and consumer confidence. On Feb. 3, it is antcipated that Reserve Bank of Australia will cut overnight cash rate targets by 0.75%.

But it is noted that a rising unemployment rate, currently 4.5%, coupled with slow economic growth may keep demand for home loans down.

Mining Cuts. The world’s third-largest mining company, Rio Tinto (RTP), is expected to cut 14,000 jobs, reduce capital spending and sell “significant assets” in response to diminished global metal demands, writes Jacob Greber in another article for Bloomberg.

Tourism Decline. The Australian tourism sector is also struggling as the government ignores the pleas for aid and places the sector at the “back of the line,” reports Nicola Berkovic for The Australian.

Foreign visitors to Australia fell 5.1% in November compared to the previous year with a tourist deficit of 35,000. The industry is entreating the government for tax incentives to boost domestic travel, and US$60 million in funding to develop tourism in emering overseas markets.

  • iShares MSCI Australia Index (EWA): down 21.8% in the last 3 months; holdings of 4.4% in Rio Tinto

ETF EWA performance

  • NETS S&P/ASX 200 Index (AUS): down 14.8% in the last 3 months; holdings of 3.6% in Rio Tinto

ETF AUS performance

The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.