ASX 200: Bi-polar economy

A sign of the economy’s good health is the largess distributed in Treasurer Scott Morrison’s recent budget, without wrecking the fiscal balance sheet. Net Debt is projected to peak at 18.6 percent of GDP in 2017/2018, with the budget returning to surplus in 2019/2020.

2018/2019 Budget Net Debt and Fiscal Deficit/Surplus

The ASX 200 is testing resistance at 6100/6150 despite the weakening Australian Dollar and troubled banking sector. Breakout above 6150 would signal a primary advance.

ASX 200

Led by the ASX 300 Metals & Mining Index. Breakout above 3800 signals a fresh primary advance, with a medium-term target of 4200.

ASX 300 Banks

But the ASX 300 Banks Index is in a primary down-trend, having broken support at 8000. Retracement that respects the new resistance level at 8000/8100 is likely and would confirm a primary down-trend with a medium-term target of the 2016 low at 7200.

ASX 300 Banks

We have a bi-polar economy, with Resources exports surging, along with Services and Rural (agriculture). Manufacturing exports are the only flat spot.

Export Volumes

But the banking sector faces challenges from a threatened housing down-turn, with near zero house price growth, and a regulator racing to shore up bank balance sheets before the bubble bursts.

Housing Price Growth