Super has first fall in 12 months
Global share retreat hits funds
AUSTRALIAN superannuation funds have had their first monthly fall in returns for more than a year.
According to super fund researchers Chant West, the median super fund in the growth category, which typically has 61 per cent to 80 per cent invested in growth assets like shares, lost 1 per cent in September as global share markets retreated slightly after a record-breaking run.
The Australian share market still generated a total return of 1.8 per cent in the September quarter after rising more than 28 per cent in the past year thanks to unprecedented fiscal and monetary policy stimulus and a stronger-than-expected economic rebound helped by vaccine developments.
But Australia’s ASX 300 index fell 2.7 per cent in September, its first down month in a year, while the MSCI All Country World index lost 4.3 per cent with the US S&P 500 down 4.8 per cent. “Global share markets retreated in September, mainly due to a spike in interest rates prompted by growing concern about emerging inflation,” said Chant West senior investment research manager, Mano Mohankumar.
Despite this setback, growth funds have returned a stunning 28 per cent over the 18 months since the COVIDinduced low point at endMarch 2020, and were now sitting about 13 per cent above the pre-COVID crisis high that was reached at the end of January 2020, Mr Mohankumar added.
It comes as the Reserve Bank has pushed back against market speculation of official interest rate hikes in Australia, with minutes of its October board meeting, released on Tuesday, repeating that the central bank doesn’t expect it’s precondition for a rise in interest rates to be met before 2024.
The meeting was held a day before the prudential regulator increased the minimum interest rate buffer rate for home loans this month.
“Given the environment of rising housing prices and low interest rates, members continued to emphasise the importance of maintaining lending standards and agreed that loan serviceability buffers were appropriate,” the RBA minutes said.
“Members also agreed that, while less accommodative monetary policy would, all else equal, see lower housing prices and credit growth, it would result in fewer jobs and lower wages growth, which would in turn create further distance from the goals of monetary policy – namely, full employment and inflation sustainably within the target range.”
The economy was expected to have returned to its preDelta path by the second half of 2022. “Nonetheless, members acknowledged that the recovery was likely to be uneven across the economy and that uncertainty would be a feature of the outlook for some time yet,” the RBA said.