May 12 2022
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Investment Updates

Australian interest rates on the up

Interest rates rise golden egg Interest rates rise golden egg

The Reserve Bank of Australia (RBA) raised official cash interest rates from 0.10% to 0.35% during its May 2022 meeting and signaled more rate hikes ahead. This historic interest rate move, aimed to tackle soaring inflation (or cost of living increases), marks Australia's first interest rate rise since November 2010.


What does rising interest rates mean for me and my super?

It’s definitely not a trigger to panic; this is not unexpected - the RBA had widely encouraged Australians to prepare for higher interest rates for some months now. Keep in mind too, while interest rates have increased and are headed higher, they remain at historically low levels - and are likely to remain low, possibly for the next few years.

Rising interest rates makes borrowing money more expensive. If you are a mortgage holder, it’s clearly unwelcomed news. The RBA’s official cash interest rate won’t be the same interest rate you are paying on your mortgage, but it does have an influence. Ditto for all other loans. A 0.25% interest rate rise would see monthly repayments on a $600,000 home loan rise by $74 a month or $888 per year*. All other things being equal, more money being spent on repaying your loans means there would be less money left for you to spend on other goods and services.

But it’s not all bad news. Rising interest rates can also lead to more returns on savings and Super cash investments which target an interest rate benchmark, such as Rest’s Cash option, which are likely to provide higher returns as official interest rates increase. 

How is Rest positioned?

Our focus remains on delivering long-term competitive investment performance for our members. The impact of rising inflation, how it could slow economic growth and consumer spending, and how the RBA could further respond, are all developments we continue to monitor closely.

Given the uncertain market backdrop recently both at home and abroad, we reduced our exposure to shares and increased our exposure to Fixed Income and Cash - moving the Core Strategy to a more defensive positioning. We continue to retain a highly diversified portfolio, and in the current high inflation environment, continue to see much benefit from investments in more inflation resilient unlisted assets, like infrastructure, property and agriculture.

Rest Advice when you need it

To help you meet your retirement goals, we offer a range of diversified and single asset class options, with varying risk profiles and return objectives. Before choosing an investment option(s), you should consider your risk appetite and return objectives. At rest.com.au/advice you’ll find the Rest Advice online tool which you can use to check your investor profile to help you see which investment option might best suit you. If you feel you’d like some extra guidance, you can talk over the phone with a Rest Adviser. Just visit rest.com.au/advice to book your appointment. 

*Figures are an estimate only based on https://www.finder.com.au/rba-survey-3-may