The Year That Was… 2023

Australia’s Financial Highlights

As we bid farewell to 2023, let’s glance back at the financial journey that defined Australia’s financial landscape.

Interest Rates Climbs

The Reserve Bank lifted the cash rate five times in 2023, raising it from 3.1% to 4.35% by the end of the year. This increase normalises returns on bank accounts and helped kerb inflation to 4.6% at the end of November. The RBA’s inflation target is 2-3%.

Lending Rates back to normal

Since 1993 – that’s 30 years ago, variable interest rates have been at an average of around 8% per annum. After really low rates of 2% during the early 2020s, this increase helps to cool real estate speculation when lending rates are back to normal at 7%.

Economic Resilience in the Face of Global Challenges

Despite the global uncertainties that continued to ripple through international markets, Australia showcased economic resilience throughout 2023 by increasing migration to more than 500,000 people. Migration supported economic growth in all parts of the economy, including house prices.

Stock Market Soars

The ASX hit new highs after lagging markets for much of the year with Australian shares rebounding sharply in December, rising 7.3 per cent to close at record levels.

Real Estate Rides Waves

Property markets varied across regions, influenced by government immigration policies and changing consumer preferences. After another year plagued with higher interest rates and the rising cost of living, property prices around the country went from strength to strength. Nationally, the median house price rose by 5.4 per cent in 2023 — “a new peak level”.

Looking to 2024

As we reach the end of January 2024, Australia’s financial landscape stands resilient, primed for innovative strategies and continued success. Demand for housing will continue to support high rents and property prices into 2024. Australian shares are forecast to return 9% with dividends included, plus franking credit tax refunds. Tax cuts are on the horizon from July 2024.

Here’s a close up on how investment markets performed over the past 10 years prepared by our external research providers Zenith – Asset Returns Quilt.