Quarterly investment update - January to March 2023

Daniel Selioutine - 16 Jun 2023

Daniel Selioutine (General Executive, Investments) provides economic and market commentary for the January to March 2023 period.

Market performance

Global economic growth moderated over the March 2023 quarter as higher interest rates began to dampen economic activity. Tighter lending standards, the rising cost of debt and rising cost-of-living pressures have the potential to weaken growth further. Other measures of economic activity remain robust. In particular, labour markets are positive, nominal wage growth is generally high and consumer demand for services remains strong.

Inflation is moderating at varying rates in developed and developing countries, but core inflation remains elevated. Energy prices have fallen and supply chain pressures have eased, however labour market constraints, housing costs, strong wages growth and energy price volatility have the potential to keep inflation sticky in the short term.

House prices stabilised in the US and Australia over the quarter following a period of sharp declines. In Australia this can be partly attributed to structural factors such the shortage of housing supply and the post COVID-19 rebound in immigration. Future house price movements depend in part on the ongoing impact that recent interest rate rises will have on economic activity and employment.

The US debt ceiling has been a source of uncertainty and some market volatility, however the Democrat and Republican parties eventually reached agreement to lift the ceiling in exchange for some limits on government spending.

The 2023 Australia Federal Budget was released but does not materially change the economic outlook. There were some modest 'cost of living relief' measures, and a surprise estimate of a surplus that was driven by larger than expected tax receipts.

China's economic situation is improving post it's reopening from COVID related lockdowns. The slump in China's housing market may have bottomed but still has potential to weigh on household consumption, despite generally strong savings and spending capacity. The momentum from reopening may support commodity prices, although there is uncertainty on how aggressively authorities will target property and construction stimulus.

Accumulation Plan performance

Accumulation Plan investment performance was positive over three years to 30 April 2023. All nine investment options outperformed their equivalent SuperRatings^* median fund. Performance against CPI objectives remains challenged over the shorter term by persistently high inflation.

ESSSuper Accumulation Plan investment option performance:
Three years to 30 April 2023 (net of tax, net of fees)

Cash Option returns are depicted against the median SuperRatings Cash option. Defensive Option returns are depicted against the median SuperRatings Secure (0-19) option. Conservative and Balanced Option returns are depicted against the median SuperRatings Capital Stable (20-40) option. Growth Option returns are depicted against the median SuperRatings Conservative Balanced (41-59) option. Ethically Minded and Basic Growth Option returns are depicted against the median SuperRatings Balanced (60-76) option. High Growth Option returns are depicted against the median SuperRatings Growth (77-90) option. Shares Only Option returns are depicted against the median SuperRatings High Growth (91-100) option.

* SuperRatings is a third party superannuation research company providing data analysis, information and commentary to both the public and the superannuation industry. Refer to superratings.com.au for more information. Ratings are only one factor to be taken into account when choosing a super fund.

Emergency Services Superannuation Board (ABN 28 161 296 741) (ESSB), the Trustee of the Emergency Services Superannuation Scheme (ABN 85 894 637 037) (ESSSuper).

This investment commentary does not constitute advice. Investment returns cannot be guaranteed as investment markets can be volatile. As a consequence, returns can be positive or negative. Past investment performance is not a reliable indicator of future performance.

Benefits in ESSSuper's Accumulation Plan, Income Streams and Beneficiary Account products are not guaranteed or underwritten by the Victorian Government or ESSSuper, and ESSSuper does not come under the jurisdiction of the Australian Financial Complaints Authority (AFCA).

The information contained in this update is of a general nature only. It should not be considered as a substitute for reading the relevant ESSSuper Product Disclosure Statement (PDS) that contains detailed information about ESSSuper products, services and features. Before making a decision about an ESSSuper product, you should consider the appropriateness of the product to your personal objectives, financial situation and needs. It may also be beneficial to seek professional advice from a licensed financial planner or adviser. An ESSSuper PDS is available at esssuper.com.au/pds or by calling 1300 650 161.