Inflation is among the top three concerns for Australian investors according to research from Investment Trends for March, joining global economic stability and national security as the major themes keeping money managers up at night.
The researcher’s Investor Intentions Index found 59 per cent cited “tension between the world’s major economies” as the biggest concern (versus 56 per cent in February), followed by military conflict at 56 per cent (same as February).
The cash rate was the third biggest concern in February, only to be knocked down by inflation, but has been a growing worry since last December. At the end of 2021 the survey found it was a concern to 21 per cent of investors but reached 41 per cent in March.
Investment Trends head of research Irene Guiamatsia tells Professional Planner the research is an initiative the researcher normally monitors for its own internal purposes to know if there are any trends “brewing under the surface” that haven’t come to the fore yet.
“It’s research we do for internal consumption and now with the current environment, inflation and CPI numbers it’s worth putting it in the public domain,” she says.
Tuesday meet
With a potential rate increase on the cards at the monthly RBA meeting on Tuesday, GSFM investment strategist Stephen Miller said the CPI hike presented the reserve bank with a “clear challenge”.
“The six-month annualised inflation rate as measured by the RBA’s favoured trimmed mean measure is 4.9 per cent,” he said in a market commentary. “That is the highest on record since this data was first assembled 20 years ago.”
The cash rate has been at 0.10 per cent since November 2020. The RBA planned to increase the rate when inflation reached two to three per cent which wasn’t anticipated to happen until 2024. However, in recent minutes from its monthly board meetings, it has acknowledged a rate increase may be required sooner.
Tuesday will be the final meeting of the RBA board before the federal election on 21 May meaning the decision could have implications during the election season.
Miller said a rate rise before an election is not unprecedented.
“It was in anticipation of inflation at this level that in November 2007 the RBA board under then Governor Glenn Stevens increased the policy rate in an election campaign.”
The cash rate was increased by 25 basis points to 6.75 per cent.
When the RBA board meets on Tuesday, Miller said it must take similar action.
