For the first time in three years, the sharemarket closed above 5,000 last night, following strong profits from the Commonwealth Bank.
CBA shares jumped 2.4% to $67.11 and triggered an overall rise in the financial sector with Westpac increasing 2.1% to $28.33, NAB up 1.2% to $29.29 and ANZ up 0.9% to $27.81.
The market has been steadily moving toward the 5,000 mark for the past few months with the market generally performing well or remaining steady on a daily basis.
Oliver says people should look to the market as a reliable indicator of the economy.
“The sharemarket is historically a good indicator for the economy. The fact that it’s turned upward over the past year is a sign growth will pick up and this has been reflected in some companies’ results too,” he says.
A little bit of welcome news goes a long way in the retail world, with JB Hi-Fi’s shares increasing in value by 13% earlier in the week after they posted an increase in net profits.
The retailer’s profits increased by 3% to $82.1 million in the six months to December and since the start of the year their shares have increased by around 21%.
Noni B posted a profit of $2.4 million dollars this time last year which inspired a 37% jump in their share price and despite dropping to a $1.9 million profit in the first half of this financial year, directors believe they will trade well in the second half of the year.
High-end retailers have continued to perform well, with Burberry achieving a 15% jump in sales in the Asia-Pacific region for the December quarter and Australian brand Oroton continuing to do well.
Oliver says retailers which are struggling can expect spending to start to “pick up” toward the end of the year.
“I think all these indicators are consistent with a turn for the better for the Australian economy. We may have a rough patch over the next six months because it can take a while for spending to pick up, but by the year’s end it will be positive,” he says.
Australian unemployment figures have remained steady at 5.4% in January, according to the Australian Bureau of Statistics.
Unemployment rates have been recorded since 1978 and the average rate has been 6.97%, making current figures below the 35-year average.
The highest unemployment rate was in December 1992 when 10.9% of people were unemployed.
But Oliver says unemployment rates don’t always accurately reflect the economy.
“The unemployment rate has stayed reasonably low, but of all the indicators it’s probably the least reliable,” he says.
Oliver says fewer people are looking for jobs than before and these people aren’t accounted for in the unemployment figures.
“There has been a fall in the participation rate which isn’t accounted for in the figures, job seekers have given up looking for jobs.
“The participation rates indicate the size of the labour force relative to population has declined. If the participation rate had stayed where it was in 2011, then the unemployment rate would be about 6% now. Unemployment is always one of the last things to improve,” he says.
