Australians checking their financial statements during tax time could be in for a shock as average retirement savings take a hit at $8,000.
Client supercash is invested by fund managers in portfolios containing a mix of stocks, bonds, real estate and infrastructure assets – where the investments ideally grow into a healthy balance upon retirement.
The Australian stock market has plunged 15.3% since April and the S&P/ASX200, an index of the top 200 Australian stocks, fell to 6,433 on Monday, its lowest level in 19 months.
Blue chip stocks like BHP are down 11.73 percent this year, while ANZ is down 23.82 percent, Coles owner Wesfarmers is 26.31 percent and Woolworths is 23.57 percent.
Stock markets in Australia and around the world have seen a downturn in 2022 that will have a flow-through effect on retirement savings
Retirement accounts for millions of Australians have shrunk as they check their statements before tax time ends
Financial experts warn that superbalances will be impacted by the downturn as Aussies review their statements at the start of the new fiscal year.
Pensions research firm Chant West predicts a loss of 5.5 percent in the 12 months to June, while SuperRatings predicts a gain of 5 percent.
For the national average of $147,425 on super accounts, according to the Association of Superannuation Funds of Australia, this could equate to an $8,100 reduction in savings.
But senior investment research manager at Chant West, Mano Mohankumar, said investors should not panic about the dip.
“Super is a long-term investment… most people can afford to be patient. Even for those nearing retirement, they don’t take their money out as a lump sum,” he said.
AMP’s chief economist, Dr. Shane Oliver, said the most “speculative assets” are being hit hardest as the Nasdaq – the US tech stock index – is down 34 percent and Bitcoin is down a whopping 70 percent from its 2021 high.
But he agreed that pension funds would see a 5 percent loss for the fiscal year — the worst performing year since the GFC in 2008.
Stocks make up about 60 percent of government bond superinvestments — a loan to the government at a fixed interest rate — accounting for about 25-30 percent.
He said the bonds have returned the worst-performing financial year in decades — a further blow to retirement.
AMP’s chief economist, Dr Shane Oliver (pictured), said pension balances would take a 5% hit this fiscal year, but investors should stick to a “long-term strategy.”
“High volatility is the price we pay for the higher long-term returns of stocks,” said Dr. Oliver.
“It’s too early to say stocks have bottomed out…short-term forecasting is difficult…so it’s better to stick to long-term investment principles.”
dr. Oliver said those who bail out quickly when the stock market takes a downward turn generally only reinvest after stocks recover.
2022 DECREASE IN FINANCIAL MARKETS
S&P / ASX 200
6,433 on June 20 fell from a high of 7,628 on August 12, 2021.
0.70 US cents on June 20, compared to 0.76 in June 2021.
$29,568 on June 20, below a high of $88,890 on November 12, 2021.
“Selling stocks or switching to a more conservative retirement investment strategy when stocks fall sharply turns a paper loss into a real one.”
He also added that most pension fund managers will switch to a more conservative portfolio as someone approaches retirement, minimizing exposure to dramatic declines.
JP Morgan’s Marko Kolanvoic predicts that the decline in the global stock market in 2022 will correct itself by the end of the year.
He said the market is “absorbing” tightening in financial conditions, such as raising interest rates to fight inflation.
“Inflation is probably peaking or close to peaking,” he said.
“Retail purchases financed with stimulus measures last year are unlikely to stop as it can now be financed with paychecks, which is more sustainable,” Kolanovic said.
Newly elected Prime Minister Anthony Albanese said on Monday that he is confident Australia will be able to avoid a recession, despite the economic headwind.
“I’m optimistic about Australia’s future,” he said.
“We are also positioned with incredible opportunities in a number of ways, not least of being in the fastest growing region of the world in human history, we have the opportunity to become a renewable energy superpower.” to be.’
On the basis that the Fair Work Commission set a 5.2 percent increase in the minimum wage, the prime minister said there was no evidence that a wage price spiral was developing.
“If you’re one of the poorest paid workers in Australia you shouldn’t have a real pay cut, and good on (the Fair Work Commission) to do that,” Mr Albanese said.
Australia’s cost of living crisis has reached great heights after annual inflation rose to 5.1 percent
“We have some big challenges ahead of us, but that’s because we had a government stuck in neutral with 22 energy policies, none of which delivered, with no economic plan for the future.”
The comments come as inflation has risen to some of its highest levels in two decades, while the Reserve Bank recently raised official interest rates by 50 basis points to 0.85 percent — the highest amount in a single month since 2000.
“I am confident that the Australian economy can continue to grow, which means we will not be in that circumstance (of a recession).”
‘Part of it is about confidence in the economy. One of the things that drives higher inflation is, of course, higher demand.’
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