In Australia, conditions are less positive. Our economy has slowed, and households are spending less as they struggle to cope with the triple whammy of higher interest rates, higher inflation, and rising taxes. Per-capita economic growth (growth per person) fell by 1% for the year to December 2023.
In better news, unemployment is still very low, but it’s expected that slower growth will translate into higher unemployment over time – a risk the Reserve Bank of Australia is monitoring closely.
Governor Bullock is ruling nothing in or out when it comes to interest rates. At its last meeting at the beginning of May, the RBA noted that “inflation is falling more slowly than previously expected”, and that they are “vigilant to upside risk”, or in other words, there is still a risk they could raise rates later in the year, even though Governor Bullock said she hopes she doesn’t have to. A lot will depend on the economic performance data as it comes in.
What does it mean for performance?
Strong performance from share markets saw our investment options with higher allocations to shares perform well. Those with higher allocations to fixed income (bonds) on the other hand, had slightly weaker performance.
Retirees in our most popular pension option, Retirement Income Conservative Balanced option also saw robust performance. While it has a higher allocation to fixed income (bonds), which is a defensive asset, and lower allocation to shares than our Future Saver High Growth option, the strong performance from share markets offset weakness from fixed income.
Performance Focus - pension options
30 June 2024
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Retirement Income
|
1 year |
5 years p.a. |
10 years p.a. |
|---|
| Balanced |
10.64% |
7.08% |
8.07% |
| Conservative Balanced* |
7.66% |
5.47% |
6.64% |
| Socially Conscious Conservative Balanced |
9.52% |
6.61% |
7.50% |
| Conservative Balanced Indexed |
11.46% |
- |
- |
* Retirement Income Conservative Balanced option is Aware Super’s default pension option, and where most of our retired members are invested.
Source: Aware Super. Numbers are soft close. Past Performance is not an indicator of future performance.
You can view the performance of all Aware Super investment options here.
What might 2024 look like going forward?
We expect that investment markets will continue to be dominated by the path of inflation and interest rates as well as ongoing geopolitical tensions. We may continue to see volatility, those ups and downs in markets. For example, in April markets receded from their March highs, but then regained lost ground in May.
While there’s still an expectation that central banks will reduce interest rates this year, the timing and size of cuts are now more likely to be later and smaller than previously thought. Despite changing expectations causing some weaker performance in the short-term, returns for the year to 31 March, as well as longer-term returns, remain positive.
