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Aaron Alston

What Have I Learned This Year: 2023?

Written by Aaron Alston

What Have I Learned This Year?

Property prices in the major capital cities have continued to rise in 2023 despite inflationary pressure and rising interest rates.  This highlights there is no “perfect or right time” to buy if you are purely basing your decision on market conditions.  Despite what is occurring domestically and globally, there always has been and always will be buyers and sellers.  The “perfect time” to buy is when your financial situation and objectives allow you to.

Everyone is at different stages life so comparing your position or taking advice from your next door neighbour or a close friend at a local gathering is not going to benefit you because you will never have the full picture.  Getting sound advice from a financial professional (hint hint 😊) will always be the answer.  Our advisory team at Hudson who work closely with our dedicated finance specialist (Brendan Gilmour) will take the time to understand your full financial situation and help you determine if you are able to purchase a property.

Last Year’s Predictions

Prediction – I am writing this prediction with a “glass half full” mindset.  I’m predicting the RBA will rise interest rates in February by 0.25% and again in March 2023 by 0.25% (therefore increasing the overall cash to 3.6%).  Hopefully the cash rate has peaked by this point, inflation begins to decline and Australia avoids a recession.

Result – Half right.  I was correct that the RBA increased the cash rate by 0.25% in the months of February and March.  Inflation has declined this year, however not as quickly as we all would have liked.  Unfortunately, the RBA announced a further three rate rises in May, June and November increasing the total cash rate to 4.35%.

Prediction for Next Year

I am going to have another prediction on interest rates.  I’m predicting that the cash rate will peak at 4.6% with one further rate rise of 0.25% likely in February or March in 2024.  I don’t expect the cash rate to increase beyond 4.6% because it will place too much pressure on middle income households.  The Consumer Price Index (CPI) is currently at 5.4% (down from 7.8% in December 2022) which indicates that we are slowly getting inflation under control.  As the target range for inflation is between 2-3%, I suspect the RBA won’t start easing the cash rate until the second half of 2024.  If inflation continues to decrease, I predict that the RBA will slowly reduce the cash rate in the last quarter of 2024 cutting rates by 1% and therefore reducing the cash rate back to 3.6%.  This will provide mortgage pressure relief to those who need it most.

Final Word for 2023

Don’t wait for time to slow down as the world will continue to evolve around you.  Economic conditions are vastly different to a few years ago, however that does not mean you should adopt a “wait and see” approach because you may be left behind.  Hudson are regularly reviewing economic conditions, our investment philosophy and financial products that are available to investors.

A product that I believe will play a more important role in a retiree’s investment strategy leading into 2024 and beyond is lifetime annuities. A lifetime annuity is a product that delivers a regular income guaranteed for life. As our investment committee continue to investigate and research alternative products, we will update Hudson clients as to whether these alternatives are appropriate for your overall investment strategy.

Have a great XMAS and happy new year and start 2024 with a bang!

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