The Weekly Advertiser Horsham

COVID here to stay

- With Robert Goudie CFP Graddipfp Consortium Private Wealth

The third quarter of the calendar year brought with it the third and by far the biggest wave in COVID-19 infections.

Largely restricted to NSW and Victoria, the outbreak was driven by the highly infectious Delta variant. Such was its speed of spread it forced a change in strategy from one of eliminatio­n to learning to live with the virus, supported by a massive vaccinatio­n campaign.

By quarter’s end, vaccinatio­n rates were closing in on key targets that will allow a slow and selective lifting of the severe lockdown conditions that have prevailed for months.

Time to chill

You know Australia has a housing problem when the head of one of the big banks, in this case Matt Comyn at CBA, calls for action ‘sooner rather than later’ to stop the property market overheatin­g. This was on the back of Corelogic data showing house prices in Melbourne and Sydney rose 15.6 percent and 26 percent respective­ly during the 12 months to August.

The Internatio­nal Monetary Fund, IMF, also called on Australian regulators to cool the market. Do not expect this to happen through the usual instrument of increased interest rates.

Rather, look for reduced lending in specific sectors, such as investors, higher deposit requiremen­ts, or testing loan serviceabi­lity at higher interest rates.

Pop goes iron ore

Iron ore’s price bubble eventually popped as China instructed its steelmaker­s to cut back on production.

More than a quarter of the ore price fell 45 percent, with major miners taking an equivalent hit. BHP, Rio and Fortescue saw their shares tumble 33, 26 and 44 percent respective­ly.

Hot topic

In August the Intergover­nmental Panel on Climate Change, IPCC, released its latest report.

It warned that ‘unless there are immediate, rapid and large-scale reductions in greenhouse gas emissions, limiting warming to 1.5°C or even 2°C will be beyond reach’.

The report paints a grim picture of what that warmer world will look like and returned climate change to the front pages of the world’s newspapers.

The numbers

Equity markets experience­d a bit of a rollercoas­ter ride over the quarter.

All the major indices posted record highs, but most ended up within one percent of where they started.

The Aussie dollar also had a volatile quarter, trading between 71 and 75.4 US cents and finishing at 72 cents. It was a similar story against the other major currencies. In both cases the late-quarter sell-offs were blamed on expectatio­ns of higher US interest rates.

On the radar

Many of the world’s leaders will come together in Glasgow at the end of October for the 26th UN Climate Change Conference, COP26.

If they heed the warning from the IPCC, and if they agree to take the necessary steps to limit warming to 2°C – and preferably 1.5°C – it will set the scene for a dramatic economic transforma­tion, with huge opportunit­ies for those who can sort the winners from the losers.

Of more immediate concern, Chinese property company China Evergrande appears to be on the brink of collapse.

Heavily indebted to the tune of Us$300-billion, if it is allowed to fail it is likely to have global ramificati­ons, not the least for Australia.

China’s constructi­on boom has been a huge driver of demand for our iron ore.

• The informatio­n provided in this article is general in nature only and does not constitute personal financial advice.

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