Why we’re going into the new financial year carrying last year’s problems

If the 2023 financial year just passed could be distilled to one phrase it would be “a year of waiting”.

Companies are having to contend with a softer economy, weak consumer spending, continued high interest rates and higher wage costs.The big sectors of mining won’t save anything given mineral commodity prices are limply ambling along, and the other bid hitting industry, banking, will continue to feel

Much of this arrives this week, but we won’t see whether this has improved the mood of depressed consumers until the statistics feed through in coming months. But if history is any guide, financial treats that are delivered over time tend to be saved rather than spent. And while interest rates remain high, many will put the extra cash towards paying down loans or into mortgage offset accounts.

The sharemarket, which has also been anticipating the eventual interest rate turnaround, had a decent run in the 2024 financial year, particularly over the past six months. Sharemarkets tend to move ahead of interest rate and economic news and will likely remain elevated while they wait for rates to move down.Given that markets have risen while corporate profits have not, they will be further stretched over the coming six months if economies don’t experience much improvement.

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