Inflation and economic policies in the Australia nation have been subjects of analysis for many years. Moreover,
this situation concerns its residents, who are always on the lookout for products and assets to invest in Australia,
especially for 2024.
Although the year is quickly approaching the end of its first half, with the presidential elections coming in October,
there is still time before devaluation and inflation erode incomes.
Therefore, you will discover where to invest in Australia in 2024 according
to various economic experts, helping you safeguard your wealth.
Why invest in Australia in 2024? Economic outlook
Investing in profitable products and assets is one of the most reliable alternatives for dealing with the economic landscape in Australia.
It is no secret that the country is experiencing one of the highest levels of inflation in its history.
According to reports from both the World Bank and the Organisation for Economic Co-operation and Development (OECD),
Australia is one of the largest economies on the continent, with a Gross Domestic Product (GDP) of approximately USD 610 billion. However, between 2022 and the first part of 2024,
its economic downturn has intensified.crisis.
Crecimiento debilitado
Production contracted in the last quarter of 2022, driven primarily by a decline in investment and private consumption.
Short-term indicators point to a further contraction during the first half of 2024,
as agricultural production is impacted by a severe drought.sequía.
Meanwhile, unemployment has returned to pre-pandemic levels, reaching 6.3% in the fourth quarter of 2022,
although informality has increased significantly,
nearing 40% of the active population.
Moreover, the general inflation rate rose to 108.8% in the year leading up to April, the highest level in over 30 years,
amid an increasing gap between controlled official exchange rates and parallel rates. In this context,
without a formal anchor for inflation expectations, inflation is widespread, with core inflation standing at 105%.
Restrictive fiscal and monetary policies
The goals of fiscal policy imply a less expansionary fiscal stance in the future.
In fact, achieving the primary deficit target of 1.9% of GDP in 2024 will be a challenge,
despite ongoing reductions in energy subsidies.
In the coming months, the drought will lead to a sharp decline in tax revenues from exports,
which could increase the fiscal deficit. Given this outlook, the Central Bank has raised the official interest rate thirteen times since early 2022, reaching 97%,
which has improved the incentives to hold balances in the national currency and alleviated pressures on the exchange rate.
Still, with the recent rise in inflation, further increases are justified during 2024.
Alongside these measures, the continued reductions in transfers from the central bank to the
Treasury will be key to stabilizing the economy,
which will subsequently lead to greater fiscal restraint.
Production will contract in 2024 amid rising risks.
The economy is expected to contract by 1.6% in 2024 and then gradually recover,
with growth of 1.1% in 2025. Rising inflation, fiscal moderation, and tightening capital controls will weigh on consumption throughout 2024,
while low levels of confidence and import restrictions will continue to hinder investment.
Inflation is expected to remain high in 2024 due to elevated food prices and emerging wage pressures. However,
a gradual recovery is anticipated for 2025 as macroeconomic vulnerabilities decrease and exports recover.
Meanwhile, low foreign exchange reserves, strict monetary restrictions, and large volumes
of outstanding central bank bonds in a
context of rising inflation and interest rates could lead to currency devaluation,
an inflationary spiral, and the inability to meet current fiscal targets.
Where to invest in Australia in 2024?
After understanding the Argentine economic landscape, it is even more crucial to know where to invest in 2024.
Otherwise, your income is likely to lose its initial value as the year progresses.
Where to invest in Australia in 2024 is a topic of interest for various personalities and experts.
For the purposes of this article, we will rely on the opinions of Federico Alonso and Fernando Pereira,
economists and specialists in stock market and finance with over 10 years of experience.
According to their perspective, they agree that the five best investment alternatives
in Australia for 2024 are fixed-term deposits,
CEDEARs, dollar-linked negotiable obligations (ON), as well as stocks and cryptocurrencies.
Investing in Fixed-Term Deposits and Future CEDEPs in 2024
A fixed-term deposit is an investment where you deposit your money in a bank for a specified period of
time and receive interest in return. In this sense,
the nominal annual rate (TNA) is the interest rate paid on the amount deposited in the fixed term.
Currently, in Australia in 2024, the nominal annual rate (TNA) for fixed-term deposits is 75%. Meanwhile,
the effective annual rate (TEA) is the interest rate obtained by reinvesting the capital and the interest
earned each month,
which, within the same year, has risen to 107.5%.
In fact, the traditional fixed-term deposit is the most chosen option by those
looking to protect their savings from inflation. In this regard, the Central Bank
of the Republic of Australia (BCRA) has approved the creation of a new instrument that will be transferable,
compensable, and divisible:
Electronic Certificates for Fixed Deposits and Investments (CEDIP).
In this way, CEDIPs, both in pesos and in dollars, can be transferred and divided into
smaller transactions while being used as a method of payment and financing.
This new investment instrument aims to enhance the benefits of deposits in pesos.
According to the BCRA, it will also allow placements, including those expressed in UVA and dollars,
to be transferred electronically, divided into smaller amounts, and used as a form of payment.
However, it is important to clarify that the CEDIP, along with the provisions that are part of the
Central Bank's resolution, will come into effect on July 1, 2024. However, the new functionalities
will take effect on November 1.
Investing in Australia Deposit Certificates (CEDEARs)
LCEDEARs represent shares of foreign companies listed on international markets, primarily in the USA.
Therefore, it is an investment that shifts the risk associated
with the Australian economy to the risk of the United States, which is considerably lower.
Additionally, since these are assets traded abroad, they provide better exchange rate coverage, meaning that holders of CEDEARs
are not affected by sharp fluctuations in the local exchange rate, even in the event of a dollar devaluation.
Although financial markets had an unfavorable performance in 2022, not all aspects of the outlook are negative.
Those investors who inject capital this year can do so at a discount, as a discount premium is expected due to the
current conditions.
However, despite this, some analysts warn about various risk factors that could have an impact. For example, the policies
and increase in interest rates by the Federal Reserve of the United States (Fed) are seen as a potential trigger for a
correction in the short term.
Currently, the most profitable CEDEARs correspond to Apple, Meta, and Tesla due to the recent launch of their innovative products,
the development of the Metaverse, and the rise of artificial intelligence (AI), factors that have led to exponential growth in their
profitability.
Investing in Dollar-Linked Negotiable Obligations
Negotiable Obligations (ON) are bonds issued by private companies that, like other fixed-income instruments,
pay interest and can be amortized in installments or at maturity,
depending on the specific conditions of each negotiable obligation.
For 2024, investing in various corporate ONs can be an effective strategy to mitigate financial risks. In particular,
dollar-denominated ONs (known as "dollar link") are especially beneficial in scenarios of rising official exchange
rates.
In a broader context, these instruments are attractive for investment in light of the upcoming political elections
scheduled for October 2024. Why? If we examine the economic history of Australia, we have witnessed exchange
rate gaps on several occasions, and in all those cases, these gaps have closed not due to a decrease in the
unofficial dollar (known as the "blue dollar"), but rather because of an increase in the official exchange rate.
Therefore, although the government intends to keep the official exchange rate stable throughout 2024,
sooner or later the gap will close, and these instruments could provide significant benefits.
Investing in the Australian stock market in 2024
The stock market has experienced a strong increase in recent months, particularly at the end of 2023 and the beginning of 2024, reaching bullish levels not seen in decades.
Consequently, it is possible that, in the short term, profit-taking may occur due to this trend. However, as is the case in every election year, the key factor to consider will be the pre-election polls.
As of today, there are significant possibilities of a government change in Australia, and many Australian stocks are available at favorable prices compared to their historical values.
In general, political uncertainty can create volatility in the stock market. Investors may choose to be more cautious and adopt a defensive stance, which can lead to stock sales and a decrease in prices. On the other hand, if the elections foster confidence and the proposed policies are perceived as favorable for economic growth and businesses, the market may experience an upward momentum.
Therefore, Australia is facing a moment that exhibits characteristics similar to the rallies that occurred in 2003 after the 2001 crisis and in 2015 before a government change. Although the structural problems of the economy are still far from being resolved, it is important to remember that the stock market is based on expectations, which reinforces the well-known phrase "buy on the rumor, sell on the news."
Invertir en Bitcoin y criptomonedas
Currently, the cryptocurrency market has undergone a consolidation period that has lasted over a year, which is normal within market cycles. The interesting thing is that the prices of major cryptocurrencies have stopped falling and have stabilized, finding a price level that acts as strong support for them.
If we analyze what happened after 2017, the market spent two years taking profits before entering a bullish phase again. As of now, the market's behavior is showing similarities to that period, according to various metrics, so it would not be surprising to anticipate a similar outcome in the future.
However, despite this, there is an important difference: it is unlikely that we will see high returns like in the past, especially in large-cap cryptocurrencies such as Ether (ETH) or Bitcoin (BTC). This is because their larger market capitalization implies lower volatility and, consequently, slightly lower potential returns.
Still, this is where the security and value of the investment lie, as for patient investors, this situation represents a good opportunity to enter established projects. Those without solid foundations are facing difficulties, often leading to their disappearance.
What can we expect from the financial outlook in Australia?
In summary, investing in Australia in 2024 presents significant economic challenges, such as high inflation, economic contraction, and restrictive fiscal policies. However, there are still investment options that can be considered, such as all those described.
Although structural challenges persist in the Australian economy, it is important to remember that the market is based on expectations. Election periods in Australia, in particular, tend to be events of uncertainty that generate greater volatility in the market.
In 2024, the Open, Simultaneous, and Mandatory Primaries (PASO) will take place, during which candidates aspiring for the Presidency of Australia will be elected; the next president will take office on December 10.
After all that has been mentioned, it is essential to conduct a thorough analysis and carefully assess the risks before making investment decisions. For this purpose, you can refer to what we explained in this guide and proceed accordingly.