The Federal Government has announced a number of proposals as part of the Mid-Year Economic and Fiscal Outlook. The announcements in this newsletter are proposals at this stage, unless it is stated otherwise. These initiatives need to successfully pass through Parliament before becoming law and may be subject to further changes.

With the debt woes of Europe still grabbing the
news headlines, we thought it appropriate to discuss
the issue of debt management.

It’s been another eventful month, with ‘safe haven’ assets such as government bonds, gold, the yen and the Swiss franc in high demand. Assets perceived to carry higher risk such as equities, lower-quality bonds, major industrial commodities and the $A were sold off.

The RBA has opened the door for a modest easing of policy, lowering both its shortterm growth and 2012-13 inflation forecasts for Australia. A 25bps interest rate cut in November, followed by another 25bps of easing in February, now looks increasingly likely. This will be contingent on a modest core inflation outcome for Q3. ANZ is forecasting core inflation to rise 0.6% in Q3, opening the way for a rate cut in November.

There is a flurry of daily news about the drop in share values, but behind the headline perhaps we are seeing a significant shift taking place. If powerful new economies are emerging and traditional economies are slowing, how will Australia fare?