Where are Australians investing to hedge against inflation, rate rises?
Share-market volatility, property price falls, cryptocurrency crashes, rising interest rates and skyrocketing inflation have turned many investment portfolios on their head, disrupting traditional ideas of safe-haven investments.
Australians rank high-interest savings accounts and superannuation as the top places to store their money for the best returns in the event of interest rates and inflation continuing to rise fast, according to new research.
The research is based on a survey of 1000 Australians, commissioned by Send Money Australia, a global comparison website that helps Aussies living abroad, foreign nationals in Australia and small businesses find the most suitable and cost-effective money transfer service. They survey asked respondents to choose which out of 10 options presented to them would be the best place to hold their savings and get a return, if rates and inflation continued rising.
The options included: investment property; stock market/shares; superannuation; high interest savings accounts offered by the banks; managed/index funds; cryptocurrencies; collectibles such as art and antiques; gold, silver and/or other precious metals; overseas investments rather than local investments; a stronger overseas currency.
High-interest savings account
High-interest savings account ranked first, with the largest proportion (25%) of respondents choosing this option. The result points to the attraction of liquid financial assets and the probability of many Aussies holding off on investment decisions in the current environment.
As interest rates rose this year, several banks have been attracting savers with high interest accounts. These include Macquarie Bank and Rabobank both of which offer a 4% introductory rate, AMP at 3.6%; Ubank at 3.35%; ANZ at 3.25%; and Commonwealth Bank at 3.1%.
Superannuation ranked a close second, with 22% of respondents choosing this option – likely attracted by the 15% tax that this investment vehicle offers.
Traditionally perceived as one of the safest and highest-yielding investment in Australia, investment property was chosen by just 18% of respondents as the best place to put their money.
A stark fall from the 2020-21 property boom, this year has seen house prices fall at the fastest rate since the 2008 global financial crisis, due to increased interest rates. In particular, September saw property values fall by 1.8% in Sydney, 1.7% in Brisbane and 1.1% Melbourne. 
Property and shares
With more time to see an unstable property market recover, a higher proportion (31%) of younger respondents (18-34 years) were confident that putting money into investment property would provide the best return on investment. This compares with just 19% of 35-54-year-olds, and just 13% of over-55s.
The Australian share market has experienced periods of extreme volatility in the last two years, with total returns falling by 7.5% in FY2022, after rising 30.2% in FY21. As such, only 11% of respondents believe shares are the best place to put their money.
International markets saw even bigger losses in FY22, including 10.8% for the Dow Jones and 24% for the Nasdaq, lowering confidence in international investments as a safe haven. Just 1.6 per cent of survey respondents chose international investment as the best place for their money.
A small minority of respondents (7%) believe gold, silver and other precious metals provide the best return on investment. Historically, gold has seen fractional growth in value in comparison to property and shares, even though it has a long-term record of stability.
Cryptocurrency upheld its reputation for high-risk precariousness in 2022, losing approximately $1trn in value across May and June this year alone, while this same period saw popular coins such as Luna fall from highs of $116 to $0, wiping out approximately $60 billion from the crypto market. Australians are yet to forget this tumultuous period: just 3% of the survey respondents believe cryptocurrencies are the best place to put their money in.
The survey found that opinions on where money should be kept to earn the best return on investment in a period of high inflation and interest rates differed across age groups.
Compared with 19% of 35-54-year-olds, and just 13% of over-55s, younger generations (31% respondents aged 18-34) were confident that putting money into investment property would provide more return on investment given the nation’s current economic standing.
On the other hand, the highest proportion of respondents who would put money into superannuation is over-55s (30%). Just 20% of 35-54-year-olds and 12% of 18-24-year-olds chose the same. Preferences around investing money in precious metals, collectibles, cryptocurrencies and overseas investments were unpopular methods across all age demographics, at similar rates.
Despite the popularity of cryptocurrencies among younger Australians, the lack of trust in this investment was consistently evident across all age groups, chosen by just 2% of 18-34-year-olds, 4% of 35-55-year-olds and 0% of over-55s.
Detailed findings, with age and State breakdowns, can be found here: https://sendmoneyaustralia.com/where-will-australians-keep-their-money-to-hedge-against-inflation-and-interest-rates/