Today's comments from Westpac, Australia's second largest bank are a good indication that 2013 will be a challenging year for the nation's economy. In spite of strong results, the bank struck a cautious tone.
MarketWatch: - Westpac Banking Corp.'s Chief Executive Gail Kelly Monday warned of "challenging" times ahead for the Australian economy, even as the bank reported an expectation-beating rise in cash profits for fiscal 2012.To be sure, Australian economic activity remains the envy of most developed nations, as employment (5.4% unemployment rate) and retail sales remain strong. But signs of stress are developing. The economy is heavily dependent on mining (and therefore global macro fundamentals), prompting many analysts to downgrade Australia's corporate earnings growth (see story from BI). And some leading indicators on the labor markets are pointing to potential weakness going forward as well. In particular the number of job ads in the newspapers and online are continuing to decline.
|Australia's job ads (source: GS Global ECS Australia Research)|
With inflation under control, the RBA is fully expected to cut rates (to be announced shortly), with the short-term rates ultimately moving into record low territory (see discussion).