Australian Bond Exchange

Australian Bond Exchange Weekly Newsletter

21 October 2022

ABE Weekly 21 October 22

 Key Points

  • The Westpac Melbourne Institute Leading Index
  • Net migration to Australia surges
  • China’s Covid Zero Policy
  • Current investment opportunities


The Westpac-MI Leading Index continues to indicate a below-trend growth pace as we head into 2023. The September Index read is the weakest since the pandemic first hit in 2020, with economic activity falling from -0.33% in August to -1.15% in September.  

Economic growth is expected to slow from 3.4% in 2022 to 1.0% in 2023, as a result of a sharp decline in consumer spending. This slowdown is expected through 2023 as the impacts of interest rate hikes and a softening labour market are felt.  

The current -1.15% growth rate has been the result of the following: 

  • rapid narrowing in the yield spread following aggressive RBA rate hikes 
  • softening global commodity prices in AUD terms 
  • sell-off in equity markets that has weighed on the S&P/ASX200 
  • slowing down in global growth 

The Westpac Card Tracker indicates a slowdown in consumer spending with the index lifted in September and early October but now showing a gentle slowdown in underlying growth momentum. The card tracker is based on millions of cards transactions processed by Westpac each day and is a timely guide that measures the shift in consumer spending.  

Since the re-opening of Australia’s border earlier this year, net migration to the country has surged, easing labour shortages. During the pandemic, Australia closed its border to non-residents and non-citizens. This stopped the arrival of international students and international skilled labour into the country that resulted in staff shortages across the hospitality industry. 

Now that borders are open, and migration is increasing again, there is relief for some of the more intense shortages of both skilled and unskilled workers around the country. In September, there were 19,000 arrivals on temporary work visas. The return of net migration and strong population growth indicates stronger economic activity, although that will be overshadowed during the next couple of years by the impacts of RBA’s interest rate hikes to dampen inflation.  


Chinese President Xi Jinping gave a speech on Sunday at the Communist Party of China’s 20th National Congress that laid out priorities for the next five years. Xi’s tone was defiant and indicated little trace of the economic challenges China has yet to overcome, including youth unemployment and the ongoing property crisis.  

However, what matters most in investors eyes is the official policy of Covid Zero – responding with lockdowns to any outbreaks to stop the spread of the coronavirus. But, Xi did not state whether China’s stringent Covid policy would end or continue.  

China’s Covid controls helped the country quickly return to growth in 2020. But the controversial controls on business and social activity tightened this year, prompting investment banks to repeatedly slash growth estimates for China.  

On Monday, China delayed the publication of GDP data without giving a reason, the event fuelled investor uncertainty. Still, much optimism remains despite the tiger economy facing both structural and cyclical challenges. Evercore expects the Chinese economy to grow 5.2% in 2023. 

Current Investment Opportunities 

ABE is pleased to announce that we finally have an allocation to Under Armour Inc, after months of monitoring this position. Offering a fixed yield of 6.00% per annum until June 2026, it is a great opportunity to add a globally recognisable brand to your investment portfolio. 

Contact us to find out more details. 

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