Active Super

The Australian share market managed to rise almost 10 percent in the last financial year despite rising interest rates, persistently high inflation and a cost-of-living crisis.

Technology companies and resource stocks underpinned the S&P/ASX 200 Index, propelling it 9.7 percent higher to 7203.3. points in the year to 30 June 2023, amid the most aggressive tightening of monetary policy that we have seen in many years as interest rates rose from 0.1 percent in May 2022 to 4.1 percent in June 2023. 

The recovery in the local stock market reversed most of the 10.2 percent fall recorded in the 2021-22 financial year after the war in Ukraine and runaway inflation. In the US, the Dow Jones Industrial Average gained 12 percent while the S&P 500 entered a bull market and was up 18 percent in the financial year.

As a result, Active Super delivered positive outcomes in 2022-23 after reporting small negative results in the previous financial year*. Members will receive more information on how their super performed when annual member statements are delivered in September.

Stubborn inflation

The US market has been spurred on by expectations that the US Federal Reserve is nearing the end of its cycle of rising interest rates. Inflation has been easing in the US as higher rates have helped get prices under control. Higher interest rates dampen inflation by discouraging spending which slows the economy.

Even though inflation appears to have peaked in Australia and overseas,  core inflation is proving to be stubborn and remains higher than the authorities would like which explains why interest rates have continued to rise.

There is a growing expectation that the Reserve Bank of Australia (RBA) may soon hit pause on any further rate hikes, but this will depend on inflation falling back to the 2 to 3 percent comfort zone. Over the 12 months to the December 2022, quarterly inflation in Australia hit a peak of 7.8 percent, resulting in our highest annual inflation rate since 1990.

More recently, headline inflation eased to 6 percent in the June quarter from March’s 7 percent as price pressures in consumer goods like clothes weakened. Underlying inflation, which the RBA focusses on, also slowed to 5.9 percent from 6.6 percent.

Elsewhere in the economy, the labour market remains strong with the June unemployment rate at 3.5 percent as the economy continues to add jobs.

The RBA now faces a balancing act in its goal to reduce inflation and keep cost of living pressures under control without tipping Australia into a recession.

*Note: Past performance is not a reliable indicator of future performance.