Low interest rates

Interest rates in Australia have reached all-time lows. What does this mean for you?

Why do interest rates go up and down? Is this agood thing or a bad thing? While these can appearto be difficult questions, the answers are simplerthan you’d think.

Interest rates are adjusted to help create healthyand sustainable economic development. In thesame way you adjust your driving speed to matchthe road conditions, interest rates are adjusted tohelp the economy operate smoothly through thecurrent environment.

In Australia, interest rates are currently atrecord lows to help support the COVID-19 recovery.

Let’s take a look at how low-interest rates affectsuperannuation investments.

Let’s take a look at some of the exciting projectscurrently in Brandon Capital’s portfolio (and yourportfolio with HESTA).

ARE LOW INTEREST RATES GOOD OR BAD FOR ME?

Is there an upside to low interest rates? Yes.It lowers the cost of debt. It becomes cheaper torepay debt (such as personal loans and mortgages).

It is cheaper for businesses to borrow money andinvest in economic growth. This may have a positiveeffect on the value of bonds and the stock market.Your HESTA investment option may hold bondsand stocks.

Can there be a downside to low interest rates?Yes. Lower interest rates mean money held at thebank or invested in cash products (such as a termdeposits) will generate lower performance. YourHESTA investment option may hold cash and termdeposits.

WHAT DOES THIS MEAN FOR MY INVESTMENTS WITH HESTA?

HESTA has a range of investment options. Eachoption holds a different blend of assets. Theseassets include Australian shares (e.g. Telstra),international shares (e.g. Apple), cash (e.g. ANZTerm Deposits), etc.

When interest rates are low, the cash assetcomponent in your HESTA investment option willgenerate a lower return. In Australia, interestrates are already at record lows. It is possible that market conditions could lead to a scenario where cash rates continue to decrease. In some countries, interest rates have gone below zero.

It’s worth pointing out that there are two investment options that hold significant proportions of cash assets: the HESTA Conservative option and HESTA Cash & Term Deposits option.

It’s important to remember that this low-interest rate scenario will not persist forever, but we need to be prepared for a low interest rate environment for the next few years.

WHAT CAN I DO?

As part of being with HESTA, you have access to a team of dedicated HESTA advisers who can help you get the most out of your superannuation investments. Together with your adviser, you might want to look at strategies that include reviewing your investment option and income strategy. It’s easy to get help from us — and it could give you extra peace of mind. Visit hesta.com.au/adviser for more ways to get advice.

Not with HESTA yet?Join us today at hesta.com.au/join

Issued by H.E.S.T. Australia Ltd ABN 66 006 818 695 AFSL 235249, the Trustee of Health Employees Superannuation Trust Australia (HESTA) ABN 64 971 749 321.

This information is of a general nature. It does not take into account your objectives, financial situation or specific needs so you should look at your own financial position and requirements before making a decision. You may wish to consult an adviser when doing this. Before making a decision about HESTA products you should read the relevant product disclosure statement (call 1800 813 327 or visit hesta.com.au for a copy), and consider any relevant risks (hesta. com.au/understandingrisk).