February Market Scoop
Welcome to our first market update for 2022. With March only a few weeks away, 2022 is looking like it will be a turbulent year for many! Concern around Russia invading Ukraine has sidelined worries around inflation and rising rates (at-least temporarily). To add context to the situation, Russia is one of the worlds largest exporters of oil and gas. Should tensions remain elevated - expect to see more pain when visiting the bowser. Assuming the threat of war evaporates, attention will again focus on inflation and whether we are in a transitionary phase due to supply chain disruption connected with COVID. As costs slowly increase, the Reserve Bank of Australia will eventually be forced to lift rates. Many economists are predicting this will occur around August 2022 in Australia – something to watch.
As rates rise, homeowners will begin to pay substantially more for their loans which will reduce the amount which can be spent elsewhere. As the average loan in Australia is over $500,000 according to Canstar, rates only have to lift a little before significant pain is imposed (looks like “smashed avo on toast” will soon become a thing of the past for many). During times of uncertainty, we often like to reflect to a simple chart that Dr Shane Oliver from AMP is famous for creating. The below illustration shows significant events from the past and although terrible at the time, financial markets were able to recover as businesses evolve to new conditions.
Monthly jargon buster – Reserve Bank of Australia (RBA) The (RBA) is Australia's central bank and banknote issuing authority. It has had this role since 14 January 1960, when the Reserve Bank Act 1959 removed the central banking functions from the Commonwealth Bank. The bank has the responsibility of providing services to the Government of Australia in addition to also providing services to other central banks and official institutions. It currently consists of the Payments System Board, which governs the payments system policy of the bank, and the Reserve Bank Board, which governs all other monetary and banking policies of the bank. Message from the Synergy Team: In an effort to deliver high service standards and back-office controls, we have recently welcomed Camela Gomez to the team. This is an exciting time for Synergy Private Wealth as we continue to strive for excellence as we transition through these interesting times.