Investment
14 September, 2023

Market update and year in review for 2022-23

Despite surging inflation and interest rates, the 2022-23 financial year proved more buoyant for share markets, helping us deliver positive returns across all investment options.
It was also an important year for benchmarking our portfolio’s carbon footprint as we move to play our part in supporting the transition to a low-carbon economy.

Our performance 

After challenging investment conditions in 2021-22, share markets rebounded positively in 2022-23.

As at 30 June 2023, our Balanced (MySuper) investment option achieved a return of 9.19% for the financial year, and our Pension Balanced option returned 10.34% for the period.

More importantly, our long-term performance remains strong.

Our Balanced (MySuper) option — our default and most popular option — has outperformed the average MySuper fund over five, seven and ten years.

It’s also been ranked in the top 10 performing MySuper funds for ten-year returns by SuperRatings.

This is a strong backing for our investment strategy looking forward, which is well-balanced to navigate short-term market turbulence while giving us the confidence to pursue compelling long-term investment opportunities.

View our performance

 

Inflation and interest rates put pressure on households

The big financial story for 2022-23 was surging inflation and interest rates.

Strong consumer demand, supply chain disruptions, and the conflict in Ukraine all contributed to higher prices for goods and services across most global markets.

In late 2022, Australia’s annual inflation rate rose to 7.8%, a 25-year high. In the US and Europe, it rose to even higher levels.

Inflation across major economies graph

To curb this trend, central banks worldwide moved quickly to increase interest rates. This is a common economic strategy designed to increase the cost of borrowing and slow consumer spending and demand.

Since July 2022, the Reserve Bank of Australia (RBA) lifted official interest rates from 1.35% to over 4% by June 2023. US, European and British central banks also hit the hike button, pushing rates to levels not seen in over a decade.

Policy Rates Across Major Economies graph

Of course, higher interest rates mean higher mortgage repayments for homeowners. And while rates are nowhere near historic highs, the rapid pace of increases has shocked many Australians already struggling to pay bills and afford groceries.

 

Inflation shows signs of slowing 

The good news is that peak inflation is likely behind us. As of July 2023, Australian inflation dropped to around 6% for the year, with the US and Europe following similar trends.

While this figure is still very high (double what the RBA would like), financial markets have generally responded positively under the expectation that central banks will become less aggressive with their interest rate hikes.

The 2022-23 financial year’s returns for most major investment asset classes showed vast improvements compared to the previous year’s, with Australian and global shares doing much of the heavy lifting.

A better year overall for markets graph

This starkly contrasts with the unusual conditions of 2021-22, where Australian and global share markets declined in unison with fixed-income markets.

 

Inflation versus returns

Inflation measures how fast the price of costs and goods and services rises over time. The RBA generally aims to keep inflation between 2-3 per cent per year in Australia.

Because prices generally increase over time, a dollar today won’t buy you the same amount in ten, twenty or thirty years.

To ensure the super you save today holds value over the long term, we set medium- to long-term, inflation-adjusted return objectives for all pre-mixed investment options.

Our return objective for our default Balanced (MySuper) investment option is ‘CPI +3% p.a.’.

CPI is the Consumer Price Index, a standard inflation measure based on how much the average Aussie household would pay for goods and services at a point in time.

The graph below shows how much a $10,000 investment in our Balanced (MySuper) option would have grown between 2014 and 2023 versus inflation, based on our performance.

Investing for the long term graph

Here we can see that despite inflation (blue line) increasing rapidly in the last few years, our actual returns (green line) have significantly outperformed inflation in the long term.

 

Setting our carbon footprint benchmark

We believe climate change is real and are committed to reducing our carbon footprint and supporting the transition to a low-carbon economy.

In 2021, we set an ambitious target to reduce our total investment portfolio’s attributable carbon footprint (financed emissions) by 50% by 2030, compared to a baseline as at 30 June 2022 .

The first step in this journey was to establish a baseline measure by calculating our attributable financed CO2 emissions levels as of 30 June 2022.

As a fund with thousands of investments across many different markets and jurisdictions, this was no easy task. However, it is essential for us to track our carbon reduction progress and to better understand our portfolio’s carbon-related activities.

To undertake this financed emissions measurement exercise, we have engaged an external consultant, Emmi, who uses machine learning modelling to generate robust financed emissions estimations for 90% of the investment portfolio.

The carbon footprint of Spirit Super’s benchmark is 12 million tonnes as at 30 June 2022, while Spirit Super’s investment portfolio had an estimated carbon footprint of 9.6 million tonnes during the same period. Our lower measure can be attributed to investment decision making.

Carbon footprint graph

From here we will continue to monitor our carbon emissions and look for opportunities to reallocate our portfolio to progressively align with targets. As always, returns on your super will be the priority.

 

This is general information only and doesn’t take into account your objectives, financial situation or needs.

Before making a decision about Spirit Super, you should consider if this information is right for you and read our Product disclosure statementsTarget market determinations and Financial services guide. These are available at spiritsuper.com.au/pds or by calling 1800 005 166.

Past performance isn’t a reliable indicator of future performance. The value of investments can rise or fall, and investment returns can be positive or negative.

Issuer is Motor Trades Association of Australia Superannuation Fund Pty Ltd (ABN 14 008 650 628, AFSL 238718), the trustee of Spirit Super (ABN 74 559 365 913). Any advice is provided by Quadrant First Pty Ltd (ABN 78 102 167 877, AFSL 284443) (Spirit Super Advice), which is wholly owned by the trustee. A copy of the Financial services guide for Spirit Super Advice is available at spiritsuper.com.au/financial-services-guide.