By Cherelle Murphy
ANU Alumni, Chair, ACT Women in Economics Network, Senior Economist ANZ.
Financial markets are no place for fence sitters, nor are they a place to hold back on opinions. Those were some of the observations of the three panellists on the Women in Economics Network’s breakfast event.
Katie Dean, Senior Portfolio Manager in AustralianSuper's Fixed Income, Currency and Cash team told the audience of career economists and students interested in finance and economics that she has to make decisions about where to allocate billions of dollars of members’ money - and that takes conviction.
It had almost been a year to the day that bond yields had started their most recent downward move, with the Australian 10 year yield falling from 2.75% to just over 1% this week, Katie said. Although it seemed the global economy was doing well in 2017 and the start of 2018, markets soon afterwards doubted that. Global bond yields started to fall again - just after most thought they could go no lower. In recent weeks, there was a small rise in yields again and Katie’s job is to decide on whether that it is just a short run blip in risk appetite or a genuine signal of a better global economic outlook. Katie is a standout manager, having stuck with her view that the RBA would cut rates this year, even when RBA officials themselves were saying the next move in interest rates was likely to be up.
The conversation also considered global inflation - or the lack there of. Katie spoke of the need for central banks to ensure inflationary expectations do not become de-anchored. That is, central banks need to ensure people believe that price will rise, otherwise there will be no incentive to spend today. That meant they had no choice but to continue to cut rates with their blunt policy tool.
NAB’s Head of Fixed Income Research, Skye Masters, noted that Australia’s central bank may consider unconventional monetary policy in the near future given the economy’s weakness, and the fact that the cash rate was already so low at 0.75%. That may involve “forward guidance” – an indication from the RBA that it will continue to stimulate the economy until it gets the economic outcomes it needs – or it may mean buying sovereign bonds.
Michelle Wright from the RBA explained how the central bank had a role to play in keeping our financial system stable against the backdrop of high household debt. She spoke about how she monitors household balance sheets to help the bank understand whether households are taking on more debt that they can manage. She said this can be particularly risky if house prices fall and economic circumstances change – for example if unemployment rises or interest rates move higher. She said that the RBA worked closely with other regulators, ASIC and APRA through a group called the Council of Financial Regulators.
All three women agreed that a career in financial markets is exhilarating and rewarding. They encouraged students to read widely if they were interested in a career like theirs. Central banks websites were a great starting point, they said, but it was also important to read alternative views and to read the research being produced by professionals in the financial markets.