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Soaring interest rates drag down super returns

4 minute read

Following a strong July, super funds suffered negative returns in August.

The median balanced super fund option delivered a negative return of -0.5 per cent in August, according to the latest estimates from superannuation research house, SuperRatings.

The firm reported that the negative result was driven by losses across developed markets as central banks, including the Reserve Bank of Australia (RBA), continued their battle against inflation.

The RBA has now raised interest rates by a total of 2.25 percentage points since May and further rate hikes are also expected in Australia as well as abroad.


SuperRatings executive director, Kirby Rappell, noted that the returns in August represented a slight pullback from the strong recovery seen in July, during which the median balanced fund delivered a positive return of 3.1 per cent.

“While it is a small negative result this month, this reflects the volatility across investment markets, with elevated inflation levels continuing to pose challenges across markets,” he said.

“Another interest rate rise impacted investment returns, though the silver lining here is that this may benefit retirees who are deriving an income from their pension accounts through exposure to cash.”

During August, SuperRatings estimated that the median growth option was down -0.4 per cent and the median capital stable option was down -0.5 per cent.

The median balanced super fund option was reported to have fallen -3.8 per cent over the past calendar year. The median capital stable option has performed slightly better (-2.5 per cent), while the median growth option has performed slightly worse (-4.8 per cent).

However, over a 10-year timeframe, the median balanced option has returned 8.0 per cent p.a., with strong results also seen for the median growth (9.4 per cent p.a.) and median capital stable (4.8 per cent p.a.) options.

“Setting a long-term strategy remains crucial, with this month's result showing that we are see-sawing between positive and negative returns over the short term, with multiple factors impacting the global economy and investment markets,” SuperRatings suggested.

“Super funds typically have processes in place to navigate these uncertain times, so setting a strategy which meets your needs and then remaining focused on the long term remains our key message.”

Last week, Minister for Financial Services, Stephen Jones, announced that the government's consultation process on the Your Future, Your Super laws has now commenced.

Jon Bragg

Jon Bragg

Jon Bragg is a journalist for Momentum Media's Investor Daily, nestegg and ifa. He enjoys writing about a wide variety of financial topics and issues and exploring the many implications they have on all aspects of life.