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Northern Territory Treasury Corporation Annual report 2013-2014



Northern Territory Treasury Corporation Annual report 2013-2014


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Northern Territory Treasury Corporation16 Investment Environment July September 2013 Growth in the global economy was subdued in the September quarter as the situation in financial markets continued to be uncertain in response to the US Federal Reserves unexpected decision to delay the tapering of quantitative easing. Economic conditions remained weak in the Euro area for some time and, as a result, investor sentiment in financial markets waned since the middle of the 2013 financial year. However, further support for markets stemming from a diplomatic solution to Syrian chemical weapons was tempered towards the end of the quarter by the US government shutdown, compounded by the looming US debt ceiling negotiations in October. Domestically, economic data released during the quarter was mixed. GDP was higher than expected, consumer and business confidence rose after the Australian election brought a conclusive result and retail sales rose slightly. However, the September quarter labour market was below market expectations; the unemployment rate rose to its highest level at 5.8% since August2009. At its August meeting the RBA decided to cut the cash rate from 2.75% to 2.5% and it remained unchanged through to September. The cut was consistent with global growth running slightly below average and the unemployment rate edging higher. The AUD declined by 0.3% on a trade-weighted basis in August 2013 against the USD but recovered in September, rising 2.9% to finish the quarter at US$0.93. October December 2013 Global financial conditions continued to be uncertain but generally remained accommodative, with volatility in financial markets slightly subsided. This followed the US Federal Open Market Committee announcement in December 2013 that they would begin tapering their asset purchases from January 2014 with the US economy continuing to steadily recover. Economic data confirmed an ongoing recovery in China and after two years of going backwards, the Eurozone showed signs of economic recovery. However, analysts argue this was insufficient to grow the region out of debt. The UK enjoyed a strong recovery during the quarter, while structural reforms and monetary and fiscal stimulus in Japan helped to re-inflate the economy after years of deflation. Domestic economic data during the December quarter was again mixed. Retail sales were strong but GDP fell below market expectations. The unemployment rate remained steady at 5.8% at the end of the quarter. The RBA left the official cash rate on hold at 2.5% throughout the December quarter. The AUD depreciated some 2.1% against the USD and 1.3% on a TWI basis in December, rounding off a weak year, down 10.6% for the year. January March 2014 The risks to global financial stability have continued to evolve during the quarter in line with shifting outlooks for growth and monetary policy. Developments in advanced economy financial systems have been broadly favourable, consistent with an ongoing recovery in economic conditions in the US. The investment environment during the quarter showed mixed results. The quarter started strong for global equity markets, which rebounded in February but somewhat retreated in March following their strong performance in the previous months. Vulnerabilities remained in Europe but conditions have improved gradually assisted by a tentative economic recovery and an ongoing European Central Bank (ECB) support. The events in Ukraine and Russia highlight that geopolitical events can have repercussions in financial markets and sectors.