With global concerns over inflationary pressures, where does Australia sit in terms of the AUD, inflation on our cost of living and of course, assets such as property, shares and commodities?
The inflationary pressures we are seeing are derived from war concerns along with monetary changes across the board along with costs rising exponentially (such as oil).
Australia is often a strange country when it comes to reaction to global conditions, with a long delay for Aussies to react to the situation and plan ahead somewhat. Being a commodity based country in terms of production and assets, Australia can often defend against inflation due to the commodities held and sold in line with inflation and growth.
Property on the other hand, may see a decline as interest rate pressures tighten household budgets. This may take a few years to take effect and there’s the potential that tech companies could bring a range of employment opportunities to the country also, reducing employment pressures for the people. The government, banks and a range of other parties have great vested interest in holding the property market up, so there will likely be policies, changes and potentially better tax benefits to investors if property declines, so as to help improve the property market during the inflationary period and make it a more attractive investment.
Shares in consumer staples and healthcare could be somewhat safer options (provided the company itself is doing the right things) as people need these services regardless of the market. For example, if money is tight, luxury goods and exotic travel might go to the back burner while food and staying alive will take the forefront of thought regardless of the monetary climate.
Fortunately, as Australia is far away from other continents, it seems to delay the effects greatly. This gives us plenty of time to think, assess and react to what is going on and learn from the other continents. Unfortunately this wasn’t the case with COVID, when we allowed a ship full of COVID victims into the country to roam around, infecting and locking down all states eventually. On the bright side, it was plain to see that would be the outcome, we just need to ensure the right decisions are made, since we have far more information than the majority of countries which are affected much sooner than us.
What are your thoughts on the effects that inflation will have on Australia in the coming 1 to 3 years?