As the weather cools and we start to reach for our umbrellas, the focus on the local economic front is the May 9 Federal Budget.
The March quarter CPI, our main measure of inflation, rose 0.5 per cent. This took the annual rate of inflation to 2.1 per cent, the first time it’s been within the Reserve Bank’s 2-3 per cent target band in over two years, reducing the need for further rate cuts to stimulate the economy.
On the global front, the economic spotlight in April shifted to Europe, with France and the UK facing elections that will shape Europe’s economic future. In the UK, Prime Minister Theresa May called a snap general election for June 8 to win a clear mandate for the long process of leaving the European Union.
In France, centrist Emmanuel Macron and far right Marine Le Pen won the first round of the French Presidential elections. Macron, a former economics minister and investment banker is front runner to win the second round of voting on May 7. Investors reacted positively, with the Euro and French stocks rising as did Wall Street. Macron is a free trade supporter with a platform of cutting corporate tax and economic stimulus; Le Pen campaigned on removing France from the European Union. As France is the second biggest member of the EU after Germany, it’s exit would have greater ramifications for the European economy than Brexit, with some economists saying it could spell the end of the Eurozone and push Europe into recession.
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