Economic Update: The Good, Bad, Ugly
- Anthony Mazza
- Jun 10
- 2 min read
Financial expert Bruce Williams from our strategic partner Elston Financial discusses the major forces shaping global and Australian markets. The conversation is structured around three interconnected themes.
1. The Big Three Macro Thematics
Bruce identifies three major forces currently driving markets:
Inflation & Interest Rates
Rates had started to fall but have since reversed, with further rises now expected in both Australia and the US. High government spending is keeping inflation structurally elevated, and wage growth (second-highest on record) is adding further pressure.
AI – Transformative but overhyped in the short term.
Power and water demands are enormous, costs are high, and data privacy concerns limit adoption. The AI trade has created extreme market concentration (The Magnificent Seven now ~40% of US markets, which is ~65% of global markets).
Geopolitical Instability (Iran War)
Energy disruption flows through to supply chains, inflation, and household budgets. A resolution would be positive, but infrastructure damage means recovery would take years.
2. The AI Trade - Opportunities & Risks
Companies perceived as AI beneficiaries (chipmakers, data centres, copper miners like BHP) have surged — but sustainability is in question. Companies perceived as AI victims (Carsales, Xero, Wisetech, ResMed) have been oversold. Bruce argues the market has "thrown the baby out with the bathwater" and sees value in these.
NVIDIA's model of funding its own chip customers is compared to a Ponzi scheme.
3. Australian Housing & Banks
Australians' financial well-being is inextricably tied to the housing market, a structural vulnerability. Proposed changes to negative gearing and capital gains tax could cool the market.
Banks are trading at elevated multiples while bad debts sit at all-time lows, a fragile picture if conditions normalise.
Advice: Borrow cautiously. The era of being rewarded for over-borrowing may be ending.
4. Energy Policy
Australia is a major gas exporter, but faces the irony of potentially needing gas import terminals due to policy settings. The transition to renewables is happening too quickly and without a rational, diversified approach. Other countries are restarting coal plants because renewables alone aren't meeting demand.
Key projects (e.g., Santos's Narrabri gas project) have been stuck in the approvals process for over a decade.
Closing
Despite the concerns, Bruce is not entirely negative; company profitability has beaten expectations. But the mood is cautious: inflation isn't coming down soon, interest rates aren't either, and everyday Australians are feeling it in their pockets. As Bruce puts it, cocktails are $24–$25, and they're not coming down any time soon.
If you'd like clarity on your options before 30 June, we're here to help.
