Hardly smooth sailing, but stabilised
"I think things have stabilised - not in a great place, but at least they have stabilised," ASX chief executive Elmer Funke Kupper said.
He welcomed a breakthrough in negotiations among US politicians over the "fiscal cliff", noting that it was "late, of course".
"I think Europe stabilising has been very helpful as well."
Speaking before accounting firm KPMG's yearly Couta Boat Classic at Sorrento, Mr Funke Kupper said the removal of uncertainty over the fate of Spain, Portugal and Greece could help consumer confidence.
"I'm a little bit more optimistic about this year than perhaps I would have been six months ago, but it all hinges on whether Europe is going to be OK, and that's still untested."
He said the coming election "will give us another nine months of noise".
"In some ways we will probably have six months of very limited initiatives as people get ready for the election.
"There will be policy announcements but the actual impact will be limited, and I think that's not a bad thing."
But even with the election out of the way, Mr Funke Kupper does not expect a quick rebound in floats and other merger and acquisition activities, which have been in short supply for the past two years.
"I can't see it getting much quieter than it has been - I mean, we really had a very quiet two years and last year was particularly quiet.
"I think, though, it's more about financial year 2014 than financial year 2013. We need another six months of stability and confidence building . . . [and] another interest rate cut.
"If Europe stabilises and we get through that and the next couple of months, we might start to see a bit more activity."
He said the saving rate of Australian households was "very high right now".
"That's good for the economy, it's good for the banks, it's not so good for the stock exchange," he said.
KPMG Australia chairman Peter Nash said 2013 would "no doubt be a difficult year".
"There are some positive signs on the horizon," he said.
He said signs of a soft landing to China's boom and a deal over the US fiscal cliff were good news.
"I wouldn't look to Europe for too much assistance, but there are some positive signs," he said.
"So I think it'll probably be a better second half than a first half - we've got an election to get over and that adds an added layer of caution and uncertainty into our marketplace.
"People will remain pretty cautious and prudent up until midyear. Hopefully, as we get to the second part of the year, we'll see a little more growth and a little more excitement in the way people feel about the economy."
He said the high dollar was "not going anywhere" and manufacturing industry needed to adapt to the new environment.
Westpac chairman Lindsay Maxsted said he was not pessimistic about 2013. "But I'm not that much more optimistic . . . because if you think through all the factors that existed in 2012 that made people cautious . . . they're all still there."
He said European central banks had done a good job restoring liquidity, but the region still suffered from high unemployment and social problems.
Frequently Asked Questions about this Article…
Elmer Funke Kupper said markets have "stabilised" — not booming but steadier than before. He warned the outlook still depends on Europe holding up, and that continued low consumer confidence means any non-mining upswing is at least six months away.
The federal election is expected to add around nine months of "noise," with about six months of limited policy initiatives as people prepare to campaign. That uncertainty tends to make investors and corporates cautious, so material market moves could be muted until after midyear.
No — ASX management doesn’t expect a quick rebound. Floats and M&A have been unusually quiet for the past two years, and a stronger pickup is more likely in financial year 2014 after another period of stability, confidence building and possibly another interest rate cut.
Key international influences mentioned include the US fiscal cliff deal (seen as helpful), any stabilisation in Europe (important but still untested), and signs of a soft landing in China. These global factors can affect consumer confidence and market activity here.
The article says Australian household saving is "very high" right now. That’s good for the broader economy and the banks (more deposits), but it’s not so good for the stock exchange because higher saving usually means lower consumer spending and less investment flow into equities.
Yes — the ASX chief suggested another interest rate cut, paired with six months of stability and confidence building, could help kickstart more market activity and possibly encourage floats and M&A to return.
The high dollar is described as "not going anywhere," and KPMG’s chairman said manufacturing needs to adapt to the new environment. That implies exporters and manufacturers will need to change cost structures or strategies to remain competitive.
KPMG chairman Peter Nash warned 2013 would likely be difficult but saw some positives (China soft landing, US fiscal deal) and expected a stronger second half after the election. Westpac chairman Lindsay Maxsted wasn’t pessimistic but wasn’t much more optimistic either, noting many cautionary factors from 2012 still remain and Europe still faces unemployment and social challenges.
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