As inflation bites the Australian economy – to the tune of 7.4% in January – taking action to reverse the drain on your investments with the guidance of a trusted financial planner like Poole Advisory is a prudent move.
Assisting clients in Sydney, Bowral and the greater Southern Highlands region, Poole Advisory has the knowledge and resources to show you how to structure your investments to ride out a volatile economic climate.
Even the Governor of the Reserve Bank, Philip Lowe, admitted he was “surprised” at the highest inflation figures since 1990. That alone is a good indication that it’s time to review your personal and business investments – as restructure could save you plenty.
“A year ago, the RBA was forecasting that inflation over 2022 would be just 1.25%,” Lowe explained in his annual address to the Anika Foundation in September. “Now, we are expecting CPI inflation this year to be around 7.75%. This is a very big change and a very large forecast miss.”
December’s inflation rate of 7.8% far outstripped the RBA’s ideal inflation rate of between 2 and 3%.
With supply and demand chains disrupted during COVID and the war in Ukraine putting pressure on oil and gas prices, global problems are wreaking havoc on average Aussie households.
Country-wide floods have also impacted production and distribution of food and other goods, pushing up costs at the supermarkets and petrol bowsers.
In the year to December 2022, according to the Consumer Price Index published by the ABS, living costs were way up:
Factor in 10 straight interest rate hikes from 0.1% to 3.6% – meaning huge lifts in mortgage repayments – and you can see why Aussies are feeling the pinch.
“Global inflation remains very high,” Philip Lowe said in his March 2023 announcement of another rate hike. “It will be some time before inflation is back to target rates. The outlook for the global economy remains subdued, with below average growth expected this year and next.”
Traditionally, good financial advice in times of inflation guides investors towards long-established inflation hedges like:
In the current market, conventional inflation hedges may or may not be the answer to every investor’s challenges.
“It’s an interesting and evolving topic in the sense that the best time to set your portfolio up with inflation hedges is when nobody else wants them,” Morningstar Australasia head of institutional portfolio management and solutions, Jody Fitzgerald, told Forbes.
“Because that’s when you actually get assets at a good price.
“Because inflation has actually surprised the market by being persistently high … a lot of those traditional inflation hedges aren’t cheap anymore. And that needs to be taken into consideration rather than just blindly buying something knowing that it provides a hedge.”
Diversification of your portfolio is extremely important in the current economic environment.
A popular investment strategy, diversification mixes a wide variety of investments within a portfolio in an attempt to reduce portfolio risk.
“Given the range of outcomes, what I would suggest that would be important to focus on is the range of inflation outcomes, the range of interest rate outcomes. And therefore the importance of proper diversification,” says Fitzgerald.
And that’s where up-to-the-minute financial advice and planning with the team at Poole Advisory could help you avoid any pitfalls as possible interest rate rises and bill hikes continue into 2023.
For more information on how Poole Advisory can guide you to stay on top of inflationary pressures and generally help improve your overall financial situation, get in touch today or book an appointment.
This information contains general advice only, that is, advice which does not take into account your needs, objectives, or financial situation. You need to consider the appropriateness of that general advice in light of your personal circumstances before acting on the advice. You should obtain and consider the Product Disclosure Statement for any product discussed before making a decision to acquire that product. You should obtain financial or credit advice that addresses your specific needs and situation before making investment or borrowing decisions. Taxation information is based on our interpretation of the relevant laws as at 1 July 2018. While every care has been taken in the preparation of this information, Prosperitas Partners Pty Ltd does not guarantee the accuracy or completeness of the information. The case studies are hypothetical, for illustration purposes only and are not based on actual returns
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