The global economy

The global economy is on the mend, with low unemployment finally feeding global wage growth. But, according to the RBA, there are a few uncertainties:

1. Global trade tensions − investment has paused while business waits to see where the raging tweets around trade tariffs, end. Hopefully, just a storm in a Chinese tea-cup.

2. US inflation − US interest rates are still very low and the country remains awash with cash from the quantitative easing years — for the non-economist, this is when a central bank like the US’s Federal Reserve (FED), ‘creates’ money.

These two factors could combine to ignite a surprise growth spurt and fire up US inflation. The FED would then have to raise rates pronto — with dire consequences for financial markets.

3. Turkey, Brazil, Argentina, Italy − Over the past month or so, each of these countries has had a shaky ride. In an interrelated global economy, contagion — a shock in one economy spreading out to affect others — is a real possibility.

We’ll keep a lookout to see how this may effect your clients and the lending market.