Market Overview – Australia’s Recent Finance and Retail Activity

Recent financial developments in Australia have signalled overall positive growth in several sectors, including areas of technology and finance, while in the retail sector recent announcements may have negative impacts on national businesses in the short term.

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A recent dip in interest rates has eased up mortgage stress, with the number of mortgage holders in Australia considered “at risk”, dropping by 1.6% in the last year, from 744,000 to 660,000, making up 16.8% of all mortgage holders compared to the previous 18.4%. While this is a move in the right direction, those with lower incomes are still at a higher mortgage risk. Of mortgage holders with a household income over $100,000 per annum only 1% were considered to be “at risk” while this jumped to 85.3% of mortgage holders with an income of under $60,000. If interest rates continue in this downward trend fewer mortgage holders may be considered “at risk” however, an appreciation in interest rates will abruptly have the opposite affect.

The Australian state of Victoria is experiencing changes in another area of the financial sector with the release of development plans by the Victorian government, announcing the establishment of a fintech center in Melbourne. According to the Victorian Premier Daniel Andrews the hope is that this will not only strengthen the Australian fintech sector by bringing together start-up companies with investors, researchers, and industry corporates in one work space, but that it will also create new jobs in the area. Technology is fast changing the way the financial sector works and the plans for this fintech hub will provide Victoria with the opportunity to win a bigger share of the industry.

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While developments with in the financial technology sector are positive, Amazon’s announcement of their $13.7 million bid for the grocery company Whole Foods has had a drastic effect on Australia’s retail sector. Supermarket company Woolworths experienced a drop in value of 3% while Metcash fell 1.7% and Wesfarmers, the operators of the supermarket chain Coles, dropped by 1% following the announcement. Companies in the electronic appliance field have also noticed depreciations as Amazon announced their bid to expand into the grocery sector. JB Hi-Fi is down 18% this year while Harvey Norman dropped 25%, and its stocks are down by 2%. Alongside the acquisition of Whole Foods, these drops are fuelled by Amazon’s intention to expand across Australia this year. Many analysts believe that this will have further negative effects on Australian companies, as Amazon eats into their earnings.

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(Please note: James O’Leary does not currently hold a position in Amazon, Whole Foods, Woolworths, Metcash, Wesfarmers, Coles, JB Hi-FI, or Harvey Norman. Henry James International does not currently own a position in Amazon, Whole Foods, Woolworths, Metcash, Wesfarmers, Coles, JB Hi-FI, or Harvey Norman. for any client portfolios).