The peak drag on consumption caused by European Central Bank (ECB) monetary policy will likely occur in the first two quarters of 2024, according to Vanguard research.
It will be an important development in a region where consumption accounts for 50%–55% of economic activity. Our research model assumes that the ECB holds its current, 4% deposit facility rate steady through the end of our forecast horizon in September 2026.
Estimated impact of 4% ECB policy rate on euro area consumption
Notes: The simulation estimates the impact of the European Central Bank’s current tightening cycle to euro area consumption and assumes the deposit facility rate stays at the current 4% level for the entire forecast horizon. It uses a proprietary error-correction model that predicts euro area consumption using a combination of short- and long-term drivers, including disposable income, unemployment rate, household wealth, and short-term interest rates.
Sources: Vanguard calculations through September 30, 2023, using data from Bloomberg.
A lowering of the ECB’s deposit facility rate would ease the drag of policy on consumption, but we don’t expect the central bank to cut interest rates until at least the second half of 2024.
“The ECB will want to maintain the progress it has made in the inflation fight, and that will likely require holding interest rates at their current high level well into 2024,” said Shaan Raithatha, a Vanguard senior economist. “We may not see a ‘painless disinflation’ where growth and employment are unaffected by higher rates.”
The views below are those of the global economics and markets team of Vanguard Investment Strategy Group as of October 19, 2023.
The Reserve Bank of Australia (RBA) left its cash rate unchanged at 4.1% for a fourth consecutive policy meeting early this month. The bank is balancing concerns that inflation remains too high, especially in the services sector, with growing economic uncertainty.
Vanguard believes the RBA will hike rates once or twice more, reaching a peak rate of 4.35%–4.6%. The latest inflation reports seem to support a more hawkish stance and, as such, the chances of a November hike are growing.
Headline inflation jumped to 5.2% year-over-year in August, driven by a sharp rise in automotive fuel prices. The jump ended three consecutive months of slower price increases. We expect headline inflation to fall to about 4.5% by year-end—as higher interest rates dampen demand—and to reach the RBA’s 2%–3% target in late 2024 or 2025.
“Despite the mixed signals, we are seeing signs that the labour market is gradually loosening,” said Alexis Gray, a Vanguard senior economist. “In recent months, the number of job vacancies has been falling, illustrating that firms are scaling back hiring plans.”
We expect gross domestic product to grow 0.75%–1.25% for all of 2023 and assess the probability of a recession over the next 12 months to be about 40%.
The first reading of third-quarter gross domestic product (GDP), due to be released October 26, may reflect continued economic resilience. Vanguard’s proprietary economic tracking model suggests that the quarter’s GDP growth could be roughly twice our original expectation of 1.5%, annual ised. Consumption continues to drive gains; resilience has broadened and remains diversified across sectors.
Between June and August, the Federal Reserve’s preferred inflation gauge rose at an annualised rate of 2.16%. It was the lowest such reading of the core Personal Consumption Expenditures (PCE) index, which excludes volatile food and energy prices, since early 2021. Continued deceleration in the core PCE would increase the likelihood of the Fed reaching its 2% inflation target in 2024.
Surprisingly strong job creation obscured what was, on balance, a neutral labour market report for September. Wage growth, the number of long-term unemployed, and private companies’ employment growth suggest the labour market continues to soften gradually.
The Federal Reserve affirmed last month its 5.25%–5.5% target range for short-term interest rates. We remain modestly hawkish, expecting one to three additional increases in the Fed’s policy rate in the coming months and no rate cuts until mid-2024 at the earliest.
Last month, the People’s Bank of China (PBOC) cut the reserve requirement ratio by 25 basis points (0.25 percentage point) for all financial institutions with ratios above 5%. Vanguard sees the move as intended to boost sentiment and to meet a demand for liquidity amid an acceleration in local government bond issuance.
We expect the PBOC to cut that ratio further in the coming quarters and to trim the policy rate by 10-20 basis points. Rising U.S. Treasury yields and a strengthening U.S. dollar may limit the room for immediate monetary support.
We remain cautious about deflation risks, as household fundamentals remain weak. Mortgage repricing could provide some support to income, and if consumer confidence improves, a solid rebound in inflation could follow.
Third-quarter growth in China’s gross domestic product surprised investors on the upside, though it aligns with our expectation of growth regaining momentum, largely due to the step-up in policy support.
Despite some improvement thanks to easing measures, the contraction in property sector investment may persist and intensify. Funding constraints among developers persist, and a contraction in sales is unlikely to reverse. Policy measures introduced in late August may not help immediately, and issues of supply and business confidence remain unresolved.
Nevertheless, Vanguard is above consensus with a full-year overall growth forecast of 5.25%–5.75%. Our forecast is highly dependent upon reviving confidence in the private sector and households.
The European Central Bank (ECB) raised its deposit facility rate by 25 basis points (0.25 percentage point) in September, to a record high of 4%. The monetary policy statement appeared to confirm our view that the bank’s rate-hiking cycle, which began in July 2022, is over. We expect the bank to maintain its 4% rate at least until the second half of 2024.
Headline inflation slowed more quickly than expected last month, supporting the view that ECB rate hikes are over. Broad consumer prices rose 4.3% on a year-over-year basis—the slowest pace of increase in 23 months.
Vanguard expects the gross domestic product, set for release October 31, to show a third-quarter contraction in the euro area economy. Another decline is likely in the fourth quarter, which would signify an economy in recession. A second consecutive inflation-adjusted decline in retail sales, in August, demonstrated continued economic weakness.
As noted, we’re sceptical that there will be a soft landing or painless disinflation. Vanguard veers from consensus and believes a contraction is likely for the second half of 2023, and that unemployment will also be higher for the rest of 2023 and in 2024.
A better-than-expected August inflation report allowed the Bank of England (BOE) to hold the bank rate at 5.25% last month. The pause, like that of the Federal Reserve, reflects the bank’s progress in its inflation fight and its desire not to restrict growth more than necessary, as discussed in Winding down the monetary tightening cycle, a commentary with Vanguard senior economists Shaan Raithatha and Josh Hirt.
Other investors may believe the BOE is done raising rates, but we think one or two more hikes remain possible, with the policy rate peaking at 5.5%–5.75%. Rate cuts are unlikely to arrive before mid-2024.
Gross domestic product is estimated to have grown by 0.2% in August, having fallen by a revised 0.6% in July. Like our assessment of the euro area, we believe the U.K. will slip into a recession in late 2023.
We believe both headline and core rates of inflation will fall close to 5% by the end of 2023, primarily from drops in the prices of commodities and core goods. Service prices may stay elevated.
Slowing inflation and slower growth have allowed emerging market (EM) central banks to pause rate hikes; some have even started cut rates. Chile, Poland, and Brazil were among those that cut rates in recent months.
For EMs in general, both core and headline inflation seem to be moderating and past their peaks, partly because of cooling developed market economies. But commodities remain a big upside risk, particularly for economies more vulnerable to food and energy price fluctuations.
Financial markets have priced rate cuts for 2024 for many EMs outside of Asia, and this is consistent with Vanguard’s view of materially slowing growth in 2024. Asia will likely have relatively robust GDP growth among EMs.
The U.S. dollar’s strength relative to other major currencies moderated in recent weeks, but it’s still higher than it was in mid-2023. The direction and magnitude of the dollar’s strength will have an impact on EMs’ import/export prices, inflation, interest, and ultimately growth rates.
Real gross domestic product (GDP) contracted in the second quarter (–0.2% quarter-over-quarter, annualised) and was revised downward for the first quarter (to 2.6%). Consumer spending retrenched. Housing activity also weighed on GDP growth for the fifth straight quarter. However, leading indicators for economic activity, while negative, have improved, suggesting a smaller third-quarter contraction.
The Bank of Canada (BOC) next meets October 25, and it may choose to hold its overnight rate target steady at 5.0%, as it did in September. A return to growth in the third quarter may prompt hawkish BOC communications.
The pace of inflation decelerated in September. It would have slowed further if petrol prices had not surged. We expect inflation to moderate this year as the impacts of policy tightening take effect. However, risks from higher shelter costs remain, as higher rates have raised mortgage interest costs and rents remain elevated because of continued housing shortages.
Canada’s economy added 64,000 jobs in September, and the unemployment rate registered 5.5% for a third straight month after three previous months of increases. The recent upward trend in employment comes alongside Canada’s greatest population growth rate since 1957.
Vanguard’s outlook for financial markets
Our 10-year annualised nominal return and volatility forecasts are shown below. They are based on the June 30, 2023, running of the Vanguard Capital Markets Model® (VCMM). Equity returns reflect a range of 2 percentage points around the 50th percentile of the distribution of probable outcomes. Fixed income returns reflect a 1-point range around the 50th percentile. More extreme returns are possible.
Australian equities: 4.2%–6.2% (21.7% median volatility)
Global ex-Australia equities (unhedged): 4.8%–6.8% (19.4%)
Australian aggregate bonds: 3.8%–4.8% (5.5%)
Global bonds ex-Australia (hedged): 4.0%–5.0% (4.7%)
The projections and other information generated by the Vanguard Capital Markets Model regarding the likelihood of various investment outcomes are hypothetical in nature, do not reflect actual investment results, and are not guarantees of future results. VCMM results will vary with each use and over time.
The VCMM projections are based on a statistical analysis of historical data. Future returns may behave differently from the historical patterns captured in the VCMM. More important, the VCMM may be underestimating extreme negative scenarios unobserved in the historical period on which the model estimation is based.
The Vanguard Capital Markets Model is a proprietary financial simulation tool developed and maintained by Vanguard’s primary investment research and advice teams. The model forecasts distributions of future returns for a wide array of broad asset classes. Those asset classes include U.S. and international equity markets, several maturities of the U.S. Treasury and corporate fixed income markets, international fixed income markets, U.S. money markets, commodities, and certain alternative investment strategies. The theoretical and empirical foundation for the Vanguard Capital Markets Model is that the returns of various asset classes reflect the compensation investors require for bearing different types of systematic risk (beta). At the core of the model are estimates of the dynamic statistical relationship between risk factors and asset returns, obtained from statistical analysis based on available monthly financial and economic data from as early as 1960. Using a system of estimated equations, the model then applies a Monte Carlo simulation method to project the estimated interrelationships among risk factors and asset classes as well as uncertainty and randomness over time. The model generates a large set of simulated outcomes for each asset class over several time horizons. Forecasts are obtained by computing measures of central tendency in these simulations. Results produced by the tool will vary with each use and over time.
All investing is subject to risk, including the possible loss of the money you invest.
Investments in bonds are subject to interest rate, credit, and inflation risk. Investments in stocks and bonds issued by non-U.S. companies are subject to risks including country/regional risk and currency risk. These risks are especially high in emerging markets.
This article contains certain 'forward looking' statements. Forward looking statements, opinions and estimates provided in this article are based on assumptions and contingencies which are subject to change without notice, as are statements about market and industry trends, which are based on interpretations of current market conditions. Forward-looking statements including projections, indications or guidance on future earnings or financial position and estimates are provided as a general guide only and should not be relied upon as an indication or guarantee of future performance. There can be no assurance that actual outcomes will not differ materially from these statements. To the full extent permitted by law, Vanguard Investments Australia Ltd (ABN 72 072 881 086 AFSL 227263) and its directors, officers, employees, advisers, agents and intermediaries disclaim any obligation or undertaking to release any updates or revisions to the information to reflect any change in expectations or assumptions.
General Advice Warning: The information contained on this web site is general in nature and does not take into account your personal situation. You should consider whether the information is appropriate to your needs, and where appropriate, seek professional advice from a financial adviser.
Retiring on your own terms is not always easy to achieve, however it is evident that those who plan for retirement are more likely to do so. Results also show that obtaining professional help during the pre-retirement years further improves the probability of attaining your retirement objectives.
The earlier you start implementing a plan the better the outcomes.
During one’s working life there is always an income to make ends meet when raising children, paying off a mortgage, etc.
Retirement planning is about the lifestyle you will have after you stop work and receiving employment income. Planning focuses on issues such as how much superannuation is enough, taking a super pension, claiming the Age Pension, making superannuation contributions while receiving a pension from a super fund, estate planning and looking after your family.
Planning properly is becoming even more important now we are expected to live longer. This greater need means that professional help has never been more important.
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Investing your hard earned savings can be a complex task. There are many issues such as levels of risk, market timing, asset classes, and your own goals, objectives and preferences that need to be considered. It can often seem a daunting task. At Wybenga Financial we have the expertise to assist you in taking control of your finances and making sure you are generating the wealth you need both now and in the future.
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After we have created your personal plan, we move to implementation. This is where we action the immediate changes set out in your plan, and put in place reminders for anything that is to occur in the future. As your professional advisers, we can action many steps on your behalf making the implementation of changes as painless for our clients as possible. We aim to make the process smooth and seamless, providing a holistic service that can be executed with ease.
The final and most important phase of the relationship with Wybenga Financial is the ongoing management and monitoring of your wealth. This ensures you are sticking to your plan and that your portfolio is aligned to your needs and attitude toward risk. An ongoing relationship ensures that we know when your circumstances change and that these can be recognised and reflected in changes to your investment approach.
While we are monitoring your portfolio from the perspective of your personal goals and situation, we also take into account the wider economic landscape and changes to legislation. We continually review and analyse our preferred investments in a structured and objective way. The benefit to our clients is that we are unemotional. This can be significantly beneficial over the long term.
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Life insurance isn’t just a cost, though it often feels like it. You buy peace-of-mind that should a serious issue effect you then the consequences won’t unduly affect your family. Insurance provides you with the ability to manage the financial and emotional impact of some of the more drastic events, whether personally or in your small business.
Insurance can’t replace a loved one but it can help reduce the financial burden by providing the capital to ensure your family has choices.
Many Australians are underinsured and the consequences can be very serious for families should there be a death or serious injury. A yes to any of the following questions means you may have a need for insurance coverage:
Do you have a mortgage?
Do you have school fees?
Do you have any personal loans?
Do you have any credit card debt?
Do you have dependents?
Would your financial position be affected if you were to suffer from an illness or injury?
Do you want to have enough capital to look after your dependents if you were unable to care for them for an extended period of time or perhaps indefinitely?
We understand that it can be difficult determining the type and level of cover you might need, let alone choosing an insurer. We can assist by helping you determine your needs and recommend an insurer that is right for you.
At Wybenga Financial we know how to protect your wealth and will recommend solutions that best suit your needs. Contact us today to discuss how we can work together: (02) 9300 3000 or .
Superannuation is mandatory but taking an early and active interest in your retirement planning is critical to ensuring your benefits are maximised by the time you retire. Many will have a superannuation scheme through employment but increasing numbers are starting their own Self-Managed Super Fund (SMSF).
For many, simply relying on employer contributions may not be enough to provide the lifestyle you desire at retirement. We can assist in building strategies to ensure your retirement goals are met and your required lifestyle is maintained throughout retirement.
It is always best to start saving and planning for your retirement as early as you can.
At Wybenga Financial we know our job is to help you meet your retirement needs and we have the skills and experience to do this for you. Contact us today to discuss how we can work together: (02) 9300 3000 or .
Self Managed Super Funds
Self-Managed Superannuation Funds (SMSFs) offer a good strategy option for many individuals, families and small business owners to build tax effective wealth and to protect assets over time. SMSFs are becoming popular for those who are ready to take control of their own super investments as they give you ultimate control and flexibility to manage your retirement benefits.
It must be noted though, that you will have increased responsibilities as a trustee of the fund. As a SMSF Trustee you need to keep up to date with all required regulations and keep up with the fast paced financial markets.
Wybenga Financial can work with you to understand your personal financial situation and decide whether a SMSF structure is appropriate for you. We will also make sure your assets are invested in the most effective way to maximise your retirement benefits.
Should you wish to consider establishing a SMSF then we can help with all aspects of the process from establishment to managing your compliance obligations.
Wybenga Financial would welcome the opportunity to discuss how we can help maximise your opportunities to grow your wealth through a Self Managed Superannuation Fund (SMSF). Contact us today to discuss how we can work together: (02) 9300 3000 or .
Your estate is made up of everything you own. This includes your home, property, furniture, car, personal possessions, business, investments, superannuation and bank accounts.
Having an estate plan is extremely important. Having a will is just the first step in your estate plan. It is critical to consider what outcomes you would like for your estate and to ensure a plan is in place to achieve those outcomes, both including and beyond the terms of your will.
Wybenga Financial would welcome the opportunity to discuss how we can help ensure your estate is organised to ensure your plans are implemented as you wish. Contact us today to discuss how we can work together: (02) 9300 3000 or .
Loans and loan management are central to overall financial management. Obtaining the best loans for your needs is crucial and Wybenga Financial can help you with solutions that meet your short and long term needs.
At Wybenga Financial we work with experienced mortgage brokers that can assist you in obtaining the best loan for your needs and objectives. Whilst this is an external service, we work closely with the brokers to ensure the process is as easy and smooth as possible.
Contact us today to discuss how we can work together: (02) 9300 3000 or .
We have partnerships with many respected property agents and research firms. This enables us to source suitable properties for individuals, couples and families looking to make an investment into property.
At Wybenga Financial we will provide the time and expertise needed to help you implement the best property investment plan possible. Contact us today to discuss how we can work together: (02) 9300 3000 or .
Strategic planning is determining how an investor is going to meet their goals and objectives. It is about helping clients define their goals, gathering information and analysing data to make a plan, then implementing the plan and monitoring the results. It is also monitoring and updating goals and objectives as clients move through different phases of life.
Secure File Transfer is a facility that allows the safe and secure exchange of confidential files or documents between you and us.
Email is very convenient in our business world, there is no doubting that. However email messages and attachments can be intercepted by third parties, putting your privacy and identity at risk if used to send confidential files or documents. Secure File Transfer eliminates this risk.
Login to Secure File Transfer, or contact us if you require a username and password.
Please enjoy the links to these free tools supplied by MoneySmart – a great resource for general financial information. Please get in touch if you would like to discuss any questions that you may have as a result of using these calculators.
Tess has over 22-years experience in Chartered Accounting Firms and in this time has had a broad range of experience in superannuation, taxation, business services, and financial strategy.
Over the last seven-years, Tess has turned her attention to Financial Planning, earning a Diploma of Financial Planning in 2015 and leading the newly established financial division of the Wybenga Group as a director of Wybenga Financial.
Tess’s mission is to bring the ethics and integrity of her Chartered Accounting background to the area of wealth management.
As a woman in a male dominated field, Tess is active in promoting gender equality in the industry through various programs and mentoring opportunities.
Using her depth of knowledge and experience in tax and accounting Tess is able to demonstrate a level of competence that is unique in the Financial Planning sector.
2001 – Commenced employment with Wybenga & Partners and part-time accountancy studies
2004 – Graduated Masters of Commerce from the University of New South Wales
2005 – Admitted as an Associate Member of the Institute of Chartered Accountants Australia
2007 – Promoted to Manager at Wybenga & Partners
2012 – Appointed as Associate Director
2015 – Awarded a Diploma of Financial Planning
2016 – Appointed as Partner of Wybenga Group and Director of Wybenga Financial
B.Bus, B.Sc, CA, DipFP
Adam has over 18-years experience in Chartered Accounting Firms and in this time has had a broad range of experience in superannuation, taxation, business services, and financial strategy.
Over the last seven-years, Adam has turned his attention to Financial Planning, earning a Diploma of Financial Planning in 2015 and leading the newly established financial division of the Wybenga Group as a director of Wybenga Financial.
Adam’s mission is to bring the ethics and integrity of his Chartered Accounting background to the area of wealth management.
Combining traditional accounting and financial services has been a welcome move for Adam, allowing him to operate and advise in the financial sector that has been a long time personal passion.
Using his depth of knowledge and experience in tax and accounting Adam is able to demonstrate a level of competence that is unique in the Financial Planning sector.
2005 – Graduated Bachelor of Science from the University of Western Sydney
2005 – Commenced employment with Wybenga & Partners and part-time accountancy studies
2007 – Graduated Bachelor of Business from the University of Western Sydney
2010 – Admitted as an Associate Member of the Institute of Chartered Accountants Australia
2010 – Promoted to Manager at Wybenga & Partners
2012 – Appointed as Associate Director
2015 – Awarded a Diploma of Financial Planning
2016 – Appointed as Partner of Wybenga Group and Director of Wybenga Financial
What is an Advisory Cadetship? An Advisory Cadetship enables you to commence your career whilst attaining the necessary university qualifications by studying part-time.
How does it work? Generally, our cadets complete a relevant business or accounting degree at the University of New South Wales, the University of Technology Sydney, Macquarie University, or the University of Western Sydney.
The Firm provides 3-hours paid study leave per week to attend university. This can either be taken at the one time or broken between days depending on the individual’s requirements. In addition, the Firm provides paid study leave for both mid-semester and end-of-year exams.
We take the work life balance very seriously at Wybenga Financial and our cadets are encouraged to have a fulfilling life outside the office. A typical day will have you arriving at the office at around 8.30am with most days concluding at 5.30pm.
What are the benefits of an Advisory Cadetship with Wybenga Financial? Our cadets benefit from the following:
Career path – on completion of their degree our cadets have significant practical experience which will assist them in advancing their careers
Work helps your studies – by working full-time our cadets are able to apply their practical knowledge in the university subjects
Camaraderie with other cadets – the Firm has a number of cadets at various stages of their career
Mentoring – cadets are paired with a senior staff member who oversees their progress and training both at work and with their studies
Communication and feedback – the Firm has an open door policy which enables all cadets to interact with all members of staff including Directors
Culture – the Firm promotes a friendly social culture with a number of functions throughout the year
Modern environment – including ‘socialising’ areas such as pool table and break out area
Training – ongoing support and technical training. We also provide internal and external training on a monthly basis
Remuneration – working full-time provides a market salary and independence with salaries being reviewed every 6-months
What happens when I complete my degree? The completion of your degree is the first step of what we hope to be a long and successful career with us. The next step is the commencement of a Diploma of Financial Planning followed by completing the requirements to become a Certified Financial Planner (CFP).
There are always progression opportunities for the right cadets and we are dedicated to the long term development of our staff.
Who should apply? Current Year 12 students or first/second year University Students who:
want to commence their career in financial advisory;
are due to commence or are currently completing a part-time business or commerce degree at university with an advisory major;
want to gain valuable hands-on experience while completing their qualifications;
are looking for a friendly working environment;
are team players who display initiative;
have a commitment to self-development;
possess excellent personal presentation and communication skills; and
are motivated and mature minded.
How do I apply for an Advisory Cadetship? To apply for a Cadetship position at Wybenga Financial send us your details. Please also include in your covering letter why you wish to do a cadetship, include relevant qualities you possess, main interests / achievements, and any previous employment.
Interested candidates should initially forward a resume/covering letter of no more than 3-pages. Please provide full details of contact information (telephone or e-mail).
What if I have more questions? For further information about our Cadetship program, please send your enquiry to .