Northern Territory Treasury Corporation Annual report 2013-2014
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17Annual Report 2014 In Australia, economic data was generally strong with building approvals, retail sales and Quarter42013 GDP numbers beating market expectations. The unemployment rate rose to a 10-year high of 6% in February but normalised to 5.8% in March 2014. The RBA maintained its neutral outlook and left the official cash rate unchanged at 2.5%. The quarter ended on a high note for the AUD, which reached its highest point since December2013 rising to 92.75 against the USD. The AUD appreciated by 3% on a TWI basis and outperformed most of the major currencies by 0.3% or more. April June 2014 Growth in the global economy was slightly below trend, but economic developments, particularly in advanced financial systems, have been broadly favourable. Economic data out of the US has begun to firm up supporting economic recovery. The risk of European deflation remained a concern with the prospect of the ECB policy action increasingly likely. The geopolitical uncertainties in Ukraine still posed a risk to sentiment, but markets seem to ignore the uncertainties with the probability of the situation escalating further considered low. Japan has recorded a significant pick-up in growth. Chinese data started weak but improved late in the quarter. Market concerns about emerging markets, however, still persist. Domestic economic data was weaker than the previous quarters. The unemployment rate increased by 0.02% over March 2014 to 6.0% in June (seasonally adjusted) and there was weakness in housing and lending, and building approvals with numbers falling during the latter part of the quarter. The Federal Budget on 13 May 2014 initially had a negative impact on consumer sentiment. However, business confidence grew in June, recording an unexpected increase, with firms apparently shrugging off the sharp deterioration in consumer confidence that followed Mays Federal Budget. The RBA kept interest rates unchanged at 2.5% re-stating that the most prudent course is likely to be a period of stability in interest rates. However, diverging views in the financial markets on RBA rate expectations varied from a near certain rate hike in 2015 to a possible chance of rate cuts. On a trade-weighted basis, the AUD increased by about 1.0% in June. The AUD fell against GBP, CAD and NZD yet rose against the USD, JPY, CHF and EUR. The AUD traded a narrow range in June due to lower non-Japan Asian currencies, a lower Australia-US 2 year bond spread, a slight firming in the USD and a markets changed outlook for the RBA rate expectations.