South Africa Enters Recession
The South African economy officially entered a recession for the first time since the GFC on Wednesday as the economy contracted 0.7% annualised in the second quarter. Slack agricultural output and soft consumer spending have put pressure on the economy.
Australian Growth beats Expectations
The Australian economy has beaten expectations with 3.1% annual GDP growth for the second quarter. The ABS indicate that commodities export accounted for half of the contribution to growth. The mining sector output grew 2.9% thanks to increase in coal, LNG and iron ore production. Even though household spending was weak, household savings fell further to more than a 10-year low of just 2.1%.
ANZ, CBA follow Westpac and lift variable mortgage interest rates
ANZ and Commonwealth Bank have followed Westpac in raising variable home loan interest rates by 16bps and 15bps respectively across both owner-occupier and investor mortgages. Both banks expressed that the decision to raise interest rates despite a flat cash rate was a difficult decision, especially given “the impact raising interest rates have on family budgets” (ANZ Executive Fred Ohlsson).
Over the past six months, Australian banks have seen funding costs increase significantly. This is mainly driven by the reliance on offshore funding, reflected in the 90-day swap rate on bank bills.