Challenges of 2022

2022 brought with it many global challenges that have affected the everyday life of all Australians. The legacy of the Covid pandemic and the uncertainty of the Russia/Ukraine War contributed towards a rising inflation rate, increased market volatility, and supply chain disruptions. Although the year brought difficulties, and continues to do so, the support of a financial adviser helped provide strategy, confidence, and clarity.

Russia / Ukraine War

The Russian invasion of Ukraine has continued since February 2022. The beginning of the war caused increased market volatility due to the geopolitical uncertainty it created. A lasting impact on the Australian economy has been the elevated price of oil. Western sanctions on Russian oil have affected global supply resulting in the price of oil skyrocketing. At one point this saw the price of petrol in Australia above $2 per litre. Although the price has reduced somewhat, the price of oil will remain elevated due to the conflict involving one of the biggest producers of oil in the international market.

The ongoing effects of Covid

China has continued its Covid-zero policy in 2022, which has led to major lockdowns in cities across the country. This has affected factories and businesses, creating problems for Chinese economic growth, as well as the global supply of goods and services. Chinese factory production decreased and when demand exceeds supply, prices increase. Australians have felt the burden of this as the price of consumer goods increased, increasing the already high inflation rate. China implemented policies such as the ‘white list’, allowing more flexibility for the major manufacturers within the country to try and maintain the Chinese government's goals for economic growth in 2023. The relaxation of Chinese Covid lockdown laws in 2023 looks positive for Australian inflation as the increased production could help reduce the global price of consumer goods. This has created a sense of optimism and a growing trend in confidence for international markets such as Hong Kong. The situation in China is something PKF Wealth will continue to monitor throughout 2023, to help clients navigate the associated investment challenges.

Will the inflation rate continue to rise?

According to the Reserve Bank, as well as leading economists, the inflation rate is set to continue to rise. If this is the case, Australians are likely to continue feeling further pressure on their cost of living. Interest rates are expected to trend in the same direction, proving to be a difficult time for homeowners with mortgages. It is important to note that in real terms the Australian economy was resilient over the 2022 year, growing 1.5 per cent. The outlook for 2023 looks promising once inflation peaks and then slowly declines, making it a good time for investors to take advantage of growth

Contact your adviser today to discuss investment options for the upcoming period.

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