Guide to Manage your Finances in 2023
Staying on Top of Changes in the Financial Landscape
2023 is shaping up to be a crucial year, with several key factors affecting the cost of living, interest rates, and the real estate market.
To be prepared for what the next 12 months may bring, it’s important to stay informed and take proactive steps to manage your finances.
Record Inflation to Ease in 2023: What it Means for the Economy
Once again, inflation will be a big economic story in 2023.
In recent months, the world has seen a surge in inflation, with prices for everything from food to fuel skyrocketing.
The root cause of this inflation can be traced back to the COVID-19 pandemic and its effects on supply chains and economies globally.
However, there is good news on the horizon. According to experts, record inflation is expected to ease in 2023.
What is Inflation?
Inflation refers to the sustained increase in the overall price level of goods and services in an economy over a period of time.
It’s measured by the Consumer Price Index (CPI), which tracks the changes in the prices of a basket of goods and services.
When the CPI rises, it means that the general level of prices has increased, and the purchasing power of a currency has decreased.
Last year, Australians experienced the sharpest annual rise in the CPI since the 1990s.1
After rising sharply over the last two years, there are also some indications that inflation may finally begin to fall in 2023, with signs it has peaked in advanced economies overseas.
The Impact of Inflation on the Economy
Inflation can have a significant impact on the economy.
High inflation rates can lead to decreased consumer spending, as people are forced to pay more for the same goods and services.
This, in turn, can lead to a decrease in economic growth.
Additionally, high inflation can also lead to higher interest rates, which makes borrowing more expensive and can lead to a decrease in investment.
Why Record Inflation is Expected to Ease in 2023
According to experts, record inflation is expected to ease in 2023 due to a number of factors.
Firstly, the COVID-19 pandemic is expected to come under control, which will help to ease the pressure on supply chains.
Secondly, the rollout of vaccines around the world is expected to boost consumer confidence and lead to an increase in spending, which will help to bring down prices.
Moreover, central banks and governments around the world have implemented measures to combat inflation, such as adjusting interest rates and increasing the supply of money.
These measures are expected to help to bring down inflation rates in the coming months and years.
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What Does it Mean for the Economy?
The easing of record inflation is good news for the economy.
It will help to restore consumer confidence and increase spending, which will boost economic growth.
Furthermore, lower inflation rates will also make borrowing cheaper, which will encourage investment and lead to job creation.
In conclusion, the expected easing of record inflation in 2023 is a positive sign for the global economy.
While it may take time for prices to fully return to pre-pandemic levels, the outlook is promising.
The world is moving in the right direction, and we can all look forward to a brighter future.
Could Lower Interest Rates Be Coming Soon?
Here’s What You Need to Know
As the economy continues to recover from the impacts of the COVID-19 pandemic, many people are wondering what the future holds for interest rates. After years of low-interest rates, could we see the relief on the horizon?
Between May and December last year, the Reserve Bank of Australia (RBA) raised the official cash rate target eight consecutive times, lifting it from its historic low of 0.10% to 3.10%.2
The RBA explained these moves were largely made in a bid to return inflation to its target of 2-3%, with rate hikes used to reduce consumer demand (among other things).3
While the pace of rate rises in 2022 has been fast, the cash rate remains historically low compared to previous decades.
The year 2023 will likely be one of transition. With inflation falling and economic conditions gradually changing, the RBA may soon decide when to stop raising interest rates.
The “most likely” scenario is that the RBA will hike the cash rate higher before holding it there.
How long for will depend on how Australia’s economy handles slowing global growth.
RBA increased the cash rate at the fastest pace in many decades.
We think they’re getting near to the end of that tightening cycle, but much will now depend on what happens in the economy.
If the economy remains strong, they will have to hike more, but if the economy slows as we expect they may be nearly done.
Other important information:
What are interest rates and why are they important?
Interest rates play a crucial role in the economy, as they influence borrowing and spending habits.
When interest rates are low, it becomes easier for consumers and businesses to take out loans, which can stimulate economic growth.
What factors influence interest rates?
Interest rates are determined by central banks and can be influenced by a variety of factors, including inflation, economic growth, and government policies.
Why 2023 could be the year property prices stabilise
Higher interest rates in 2022 have limited the borrowing capacity of Australians, contributing to a drop in price growth across most major capital cities.4
National home values fell 5.3% in 2022 according to CoreLogic.5 Sydney property prices led the losses among capital cities, falling 12.1% on average, followed by Melbourne (8.9%) and Hobart (6.1%).
Despite those falls, average capital city prices remain 11.7% higher than pre-pandemic levels while regional values are still up 32.2%.6 For context, over the last 10 years national dwelling prices are up 60.3%.
Property prices in 2023 would be influenced by the RBA’s next course of action. That is how it is going to likely be.
Why 2023 Could Be the Year for Stabilizing Property Prices?
The property market has been a hot topic in recent years, with soaring prices and high demand putting homeownership out of reach for many people.
However, 2023 could be the year that property prices stabilize, offering hope for homebuyers and investors alike. Let’s take a closer look.
What factors have impacted the property market in recent years?
The property market has been heavily influenced by a variety of factors in recent years, including low interest rates, a shortage of homes on the market, and strong demand from buyers.
What are the current trends in the property market?
Despite the ongoing challenges posed by the COVID-19 pandemic, the property market has remained strong in many areas, with high demand and limited supply pushing prices up.
Why is 2023 expected to be a turning point for property prices?
Experts are forecasting that 2023 could be the year that the property market begins to stabilize, as rising interest rates and a slower economy may cool demand and increase the supply of homes on the market.
How will stabilizing property prices impact buyers and sellers?
For homebuyers, stabilizing property prices could make it easier to enter the market, as prices become more affordable. For sellers, it may become more challenging to sell at high prices, but a more stable market could provide greater certainty in the long-term.
What can you do to prepare for changes in the property market?
Regardless of whether you’re a buyer or a seller, it’s important to stay informed of trends and changes in the property market.
You can also take steps to build up savings, pay down debt, and get pre-approved for a mortgage to be prepared for the future.
Meanwhile the future of the property market remains uncertain, 2023 could be the year that prices begin to stabilize.
By staying informed and taking proactive steps to manage your finances, you can be ready to take advantage of opportunities as they arise.
Key Takeaways:
- Australian inflation is expected to begin falling in 2023, although it will take some time to reach historic levels.
- As inflation falls, the RBA will be less inclined to increase interest rates – meaning rates will increase less frequently and at a slower pace.
- In spite of further falls in property prices this year, the market should stabilise by the middle of 2023.
Footnotes:
2. https://www.rba.gov.au/statistics/cash-rate/
3. https://www.rba.gov.au/speeches/2022/sp-dg-2022-11-09.html
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