‘Not too fussed’: rate holds look likely until 2019
Cash-heavy clients in search of returns may need to broaden their horizons, as the Reserve Bank of Australia (RBA) looks unlikely to break the lower for longer environment until the first half of next year.
For a record 18 meetings, the central bank left cash rates on hold at 1.5 per cent for April, surpassing a previous record of 17 meetings in the mid-1990s.
AMP’s chief economist, Shane Oliver, can’t foresee conditions triggering a change in the cash rate for the rest of 2018.
“On the one hand the global economy is strong, the RBA does not appear too fussed about recent share market volatility, the risk of a trade war and higher bank funding costs (albeit it's keeping on eye on these issues), business conditions are strong and employment growth has been strong and the RBA continues to expect a pick-up in growth and inflation,” Mr Oliver said in his sharemarket update this afternoon.
“But against this is the uncertainty around the outlook for consumer spending, labour market spare capacity remains high, wages growth remains low (although it may have troughed), inflation remains low and measures by APRA to tighten lending standards have helped cool the Sydney and Melbourne property markets. So, it makes sense to remain on hold,” he said.
In this environment, SMSF trustees are increasingly looking to non-traditional investments for returns.
As reported late last month, data from CBA shows SMSFs have been increasingly devoting a larger share of their capital to shares outside of the top 20 stocks on the ASX, as traditional safe havens fall short on yield expectations.
CBA found that in the six months to 31 December 2017, SMSFs have been increasingly tapping into global economic trends such as Chinese demand for Australian milk products.
In particular, SMSFs have noted surges at the sector level — trades during the reporting period in the food and beverage sector lifted 86 per cent by value.