Inflation Hits an All-Time High in Australia: How to Keep Your Investment Portfolio Safe

The Australian Bureau of Statistics (ABS) reported that the annual inflation rate jumped to 7.3% in the September quarter, surpassing the highest rate of 6.1% recorded in the June quarter of 1990. This has raised concerns about the impact of inflation on investment portfolios and the strategies that can protect them from its consequences.

The most significant price increases in Australia have occurred in new housing purchases by owner-occupiers (+3.7%), gas and other household fuels (+10.9%), and furniture (+6.6%). These price hikes have added to the already growing inflation rate, making it crucial to understand its effects on investment portfolios and to find ways to protect them.

Inflation can significantly reduce the value of a financial instrument, especially over long periods. Combined with low-interest rates, this results in minimal or negative returns for investors.

Strategies to protect investment portfolios from inflation

Unfortunately, there is no single solution to protect investment portfolios from inflation. Financial experts suggest including a mix of fixed and variable interest rates to create a steady cash flow for the portfolio. This provides a buffer against inflation and offers higher yields than traditional options like term deposits and savings accounts.

Inflation-resistant or anti-inflation investment solutions like the variable rate Fixed Income Accounts, an innovation by Income Direct, are becoming increasingly popular among investors who recognize the importance of keeping up with inflation. This product offers a competitive interest rate for access to capital for pre-agreed terms ranging from 3-120 months. It links the interest rate to the official cash rate set by the Reserve Bank of Australia (RBA).

Fixed Income Accounts by Income Direct

This fixed income solution offers a palatable 5.25%-9.70% per annum, providing clients with a meaningful interest rate on their capital while keeping pace with changes in official interest rates.

"Our Fixed Income Accounts cater to clients Australia-wide seeking alternative ways to deploy their capital to earn income," says Gerard Sivaprasad, Income Direct’s Executive Chairman. "More people are becoming aware of ways to mobilize their capital, and we enjoy hearing about the difference our service and more income makes to people's lives."

Mr. Sivaprasad stated that the firm focuses on high-quality direct investment opportunities that deliver competitive returns for the company while managing risk through its asset diversification strategy.

Income Direct also goes above and beyond with its customer service, assigning a dedicated Australia-based personal Account Manager to every client. This approach to customer service gives clients comfort they can deal with the same person throughout the life of their account rather than having to persevere with call centers which are a common frustration when dealing with financial institutions.

Conclusion

Inflation has become a significant concern in Australia due to the COVID-19 pandemic, the Ukraine war, and strong consumer demand. With the annual inflation rate at an all-time high, it is essential to understand its impact on investment portfolios and to find strategies to protect them.

Although there is no foolproof approach to beating inflation, including fixed and variable Fixed Income Accounts in portfolios, and investing in anti-inflation assets like those provided by Income Direct, can provide a way to earn higher yields with the peace of mind of a capital-stable solution.

This article does not necessarily reflect the opinions of the editors or management of EconoTimes