IN A NUTSHELL:
- 2022 will see positive returns in the stock & property markets, although perhaps not as strong as the last 12-months!
- The market is saying that interest rates are going to rise BUT Central Banks are telling us this isn’t necessarily the case. If it is going to happens, it’s likely it’ll be low – around 1%
- Lending rules are tightening to help with debt serviceability and try reign in the recent property price boom
As Australia begins to open up and enter the new, “new normal”; we sat down with Vanguard Investment Specialist Libby Newman to gain an insight into what Australia and the world can expect coming into 2022.
Global Economy Insights
– Global equities have increased in value, crypto’s experiencing “eye-watering returns” while Global bonds and gold are on the lower end of the scale.
– The UK and Europe faced added challenges dealing with Brexit’s impact on the economy, hitting the UK particularly hard. Europe is embracing renewable energy which is amazing to see, although stability issues with the new energy sources has seen a spike in gas and fuel prices. Holland and Germany look set to experience the fourth wave of Covid, introducing significant uncertainty.
-China has been quick to action lockdowns in areas where Covid cases have appeared – impacting global supply chains and creating delays up to a few months. Interestingly, as Australia has embraced property as an investment, China are utilising structural change to pivot away from property. China is coming to terms with a rapidly ageing population, meaning that there aren’t as many workers available – creating a significant and growing shortage. These factors are likely to contribute to growth rates in the low single-digits – as opposed to the previously seen high single-digits.
Australian Economy Insights
The Australian economy has been a bit of an anomaly with imbalances seeping through. There has been an surge in demand in online shopping, shortages in building supplies – leading to price hikes in timber, used car prices have increased in price rather than decreased, and we’re seeing more jobs available than workers.
The RBA came through with emergency support offering funding facilities to big banks, which then allowed the banks to lend to businesses at lower interest rates.
The Next 3 months
We are definitely entering into a period of uncharted territory. Australia has never experienced a situation like the one we’re living through right now and it’s very difficult to predict what might happen next. Thing that we are likely to or possibly could see over the next three months are:
- A large increase in spending at restaurants and other hospitality venues
- Expected recoveries in areas that were heavily impacted by covid
- An interstate travel increase, and people starting to consider traveling overseas, even though Covid is still with us
- Open borders will impact employment levels, a bigger pool of workers will likely reduce the higher wages currently on offer
- Despite economists predicting people will be ready to return to work, other nations – including the USA still see more job openings than workers – could this happen here?
- It’s possible we could see an attitude shift as people decide they don’t want to return to commuting so much for work or are not ready to send their children back to school.