AMP’s chief economist Shane Oliver has shared his forecast for superannuation fund returns in 2023.
In his 2024 outlook, Oliver forecast that the average balanced super fund could return 5.3 per cent for the calendar year 2023.
This compares to gains since the start of the year to 7.2 per cent and losses of 5.2 per cent during 2022.
This reflects a strong year for global shares, but underperformance of Australian shares on the back of China worries and interest rate sensitivities. Government bonds slumped into October as yields rose, but then rallied in anticipation of rate cuts.
“The five key themes for 2023 were better than feared growth, disinflation, peak interest rates (probably in Australia), lots of geopolitical threats, but not as bad as feared, and AI hit the big time. This boosted shares and helped bonds with solid superannuation funds returns,” Oliver said.
“Reflecting all of this, balanced super funds had solid returns, continuing a zigzag pattern of strong and weak years since 2017.”
Looking ahead, Oliver expects the main things to watch out for in 2024 are sticky inflation and central banks, the risk of a recession, the US presidential election, and how Australian consumers and house prices respond to the impact of higher interest rates.
“The next 12 months are likely to see a further easing in inflation pressure and central banks moving to get off the brakes. This should make for reasonable share market returns, provided any recession is mild as we expect. But sticky services inflation, still high recession risk, China worries, and geopolitical risks are likely to ensure a few significant bumps along the way,” Oliver said.
“Bonds are likely to provide returns above running yields, as growth and inflation slow and central banks become dovish.”
Last month, research house Chant West expects the median growth funds (those with 61–80 per cent growth assets) to return 6.5 per cent.
Since the start of January, the median growth fund has returned 3.7 per cent so far and by 4.3 per cent over the past 12 months.
