This is the year to ignore the experts’ forecasts

WITH Michelle BALTAZAR

Editor-in-Chief • Money magazine

The start of the year is when economists and financial market commentators chance their arm to forecast how the coming year might play out, giving not-sosubtle hints to investors for where they should put their hard-earned and now inflation-ravaged money.

But given how badly most forecasters have been faring these past few years, this writer has no intention of being so foolish as to try to predict what 2023 has in store.

Showing how bad they’ve been, the defining economic and financial events of our time have been the global pandemic, the war in Ukraine and the ensuing chaos in world energy and agriculture markets, the upending in global supply chains, rampant inflation, looming global slowdowns and possible recessions.

As a result, most economic forecasts turned out to be about as useful as an ashtray on a motorbike.

It is hardly a surprise, then, that, this time round, many of the world’s leading financial newspapers have been telling their readers to forget forecasts and to instead embrace uncertainty.

Dismal year for super

To see why this is good advice, you only need to see how last year played out in Australia.

While 2021 was the best calendar year yet for superannuation, delivering an average return of 18%, 2022 has just delivered an estimated -4.3%, making it the worst since the 2008 GFC.

Adding in the effects of inflation, the real returns from default superannuation are now sitting at a dismal -10% or so.

Causing the damage were the Australian sharemarket, which delivered -4%, and US equities, which delivered -20%.

But what has spooked many investors is how, at the same time, surging supply-side-driven inflation triggered interest rates around the world to accelerate at their fastest-ever pace.

This led to a collapse in global bond market returns that look set to end 2022 at -20% as well.

Look on the bright side Just because things are bad now doesn’t mean they’ll stay that way – this is something we call “recency risk”, which is the uncanny silliness of thinking that what’s happening now will keep going forever.

To counter this kind of thinking, consider this: in the past 30 calendar years, while the average increase in the S&P/ASX 300 total returns index

Downsizers can hit a $300k (or $600k) home run

While everyone was partying on January 1, eligibility for the superannuation downsizer contribution was further reduced to age 55, giving more people the ability to top up their savings from selling the family home.

You can contribute up to $300,000, or $600,000 per couple, if you’ve owned the home for at least 10 years.

The contribution cannot ex- ceed the sale price and must be made within 90 days of change of ownership.

Downsizer contributions don’t count towards your concessional or non-concessional contribution caps and there’s no age limit and no requirement to meet the work test.

“People 55 and over may not have had the super guarantee their entire working life,” says planner Marisa Broome.

“They’re the forgotten generation the government is trying to help – they can’t access the age pension until 67 and they don’t have enough super to live on.

“It’s trying to help those people be more self-sufficient in retirement.”

“If a couple own a $3 million house and decided to downsize, they could contribute $300,000 each, plus $330,000 each under the bring-forward rule.

“If you have access to a large sum – you’ve sold your home or business, or inherited money – you can bring forward three years’ worth of nonconcessional contributions provided that you are under 75.

“The downsizer is a very powerful way for anyone with a low super balance to boost it. You don’t even have to buy a cheaper home,” says Broome.

Xavier O’Halloran, director of was 11%, it went backwards only six times – it went up 80% of the time.

Even better, it has never gone backwards two calendar years in a row, meaning if it was to do so in 2023 it would be doing something it has never done in three decades.

On top of this, 2022’s fall of 4% is about a third the average fall of 12%, which happened only one in every six years.

And when the S&P/ASX 300 bounced back, it did so with a vengeance.

Analysis of the US stockmarket by the New York University Stern School of Business reveals a similar pattern.

None of this means 2023 will be rosy, but just as 2022 turned out to be nothing like what most of the world’s best economic forecasters expected, this year may not be as bad as most of them are forecasting either.

After all, if interest rates stop increasing as fast as they did last year, bond markets may return to positive territory, in the process calming the nerves of property buyers.

The icing on the cake may be China’s reopening and global slowdown fears enticing oil prices to return to pre-Ukraine war levels.

Super Consumers Australia, says anyone considering making a downsizer contribution should seek independent financial advice first, as there may be far-reaching implications.

For more information, see ato.gov.au/Individuals/Super/ In-detail/Growing-your-super/ Downsizer-contributions-forindividuals.

VITA PALESTRANT